<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GRAFTECH INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3629 PENDING
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
11709 MADISON AVENUE
LAKEWOOD, OHIO 44107
(216) 529-3777
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN J. WETULA
CHIEF EXECUTIVE OFFICER AND PRESIDENT
GRAFTECH INC.
11709 MADISON AVENUE
LAKEWOOD, OHIO 44107
(216) 529-3777
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO
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<S> <C>
M. RIDGWAY BARKER, ESQ. WILLIAM J. WHELAN III, ESQ.
KELLEY DRYE & WARREN LLP CRAVATH, SWAINE & MOORE
TWO STAMFORD PLAZA WORLDWIDE PLAZA
281 TRESSER BOULEVARD 825 EIGHTH AVENUE
STAMFORD, CONNECTICUT 06901 NEW YORK, NEW YORK 10019
(203) 324-1400 (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common stock, par value $0.01 per share............... $60,000,000 $15,840
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED , 2000
Shares
[LOGO]
GRAFTECH INC.
Common Stock
------------------
We are selling shares of our common stock and the selling
stockholder is selling shares of our common stock. Prior to this
offering, there has been no public market for our common stock. The initial
public offering price of the shares is expected to be between $ and $
per share. We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "GRAF."
The underwriters have an option to purchase a maximum of
additional shares from the selling stockholder to cover over-allotments of
shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
5.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS GRAFTECH INC. STOCKHOLDER
-------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Per Share............................
Total................................
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
MERRILL LYNCH & CO.
The date of this prospectus is , 2000.
<PAGE> 3
------------------
TABLE OF CONTENTS
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PAGE
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<S> <C>
SUMMARY............................... 1
RISK FACTORS.......................... 5
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS.......... 11
DIVIDEND POLICY....................... 11
DILUTION.............................. 12
USE OF PROCEEDS....................... 13
CAPITALIZATION........................ 14
SELECTED FINANCIAL DATA OF UCAR
GRAPH-TECH INC...................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 16
BUSINESS.............................. 20
MANAGEMENT............................ 35
</TABLE>
<TABLE>
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PAGE
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<S> <C>
PRINCIPAL AND SELLING STOCKHOLDERS.... 42
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................ 43
DESCRIPTION OF CAPITAL STOCK.......... 45
SHARES ELIGIBLE FOR FUTURE SALE....... 48
MATERIAL UNITED STATES TAX
CONSIDERATIONS FOR NON-U.S.
HOLDERS............................. 50
UNDERWRITING.......................... 53
NOTICE TO CANADIAN RESIDENTS.......... 56
LEGAL MATTERS......................... 57
EXPERTS............................... 57
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 57
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO
SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY BE ACCURATE ONLY
ON THE DATE OF THIS PROSPECTUS.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALER'S OBLIGATIONS TO DELIVER A
PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO ITS ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE> 4
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should carefully read the entire prospectus, including "Risk Factors" and
the Financial Statements, before making an investment decision. Unless otherwise
indicated, all information contained in this prospectus assumes that there will
be no exercise of the over-allotment option and gives retroactive effect to the
formation of our holding company.
Unless the context requires otherwise, "we," "us" and "our" refers to
GRAFTECH INC., our holding company and the issuer of the shares offered hereby,
and its wholly-owned subsidiary, UCAR Graph-Tech Inc. "GRAFTECH" refers solely
to GRAFTECH INC. "UCAR" refers to UCAR International Inc. and all of its
subsidiaries. "UCAR International" refers solely to UCAR International Inc. It
is, and after this offering will be, our parent company.
THE COMPANY
INTRODUCTION
We are the world leader in the development and manufacture of high quality,
natural graphite-based products. We provide our customers with highly engineered
solutions and products for use in diverse applications in a wide range of
industries. As the founder of the flexible graphite industry, we are building on
our long history of developing innovative products for automotive and industrial
sealing applications to capitalize on the commercialization of fuel cell
technology and expand into other markets.
OPPORTUNITIES FOR FUEL CELLS. We have been working with Ballard Power
Systems Inc. since 1992 on developing advanced flexible graphite products for
use as flow field plates in proton exchange membrane, or PEM, fuel cells. As
part of our ongoing relationship, we developed GRAFCELL(TM) products for use in
flow field plates for Ballard(R) fuel cells. Flow field plates are an integral
component of PEM fuel cells, which Ballard is developing as an alternative to
the internal combustion engine and other traditional power generation sources.
In 1999, we entered into exclusive long-term agreements to supply Ballard with
our GRAFCELL(TM) products for use in Ballard(R) fuel cells and to collaborate on
future development of advanced flexible graphite products for use in flow field
plates. Ballard is the world leader in developing, manufacturing and marketing
zero-emission PEM fuel cells that generate electricity for transportation,
stationary and portable power applications. We believe that fuel cell components
made with our GRAFCELL(TM) products, together with Ballard's leading technology,
will contribute to the commercial viability of fuel cells in the transportation
and portable power markets.
EMERGING OPPORTUNITIES. We are leveraging technologies developed in our
work with Ballard and in our independent research and development efforts to
generate new opportunities in:
- thermal management applications for computers and other electronic
devices,
- fire protection applications in construction and building materials,
- energy management applications in devices such as batteries and
supercapacitors, and
- heat management applications in high temperature industrial furnaces.
We believe that our solutions and products will create new applications and
replace existing technologies due to their superior performance and
cost-competitive nature, presenting us with growth opportunities.
1
<PAGE> 5
OUR STRENGTHS
We have developed technological and operating strengths that we believe
give us a competitive advantage. These include our:
- HISTORY OF PRODUCT AND SOLUTION INNOVATION. Since 1963, we have
identified many new applications for which our products offer innovative
solutions and advantages in performance and cost.
- EXCLUSIVE SUPPLY AND COLLABORATION AGREEMENTS WITH BALLARD. Our long-term
exclusive supply and collaboration agreements with Ballard position us to
capitalize on the commercialization of fuel cell technology.
- PROCESS TECHNOLOGY AND MANUFACTURING EXCELLENCE. Our process technology
and manufacturing excellence have driven our ability to modify our
products to cost-effectively meet the unique performance requirements of
our customers. We believe that our process technology will enable us to
efficiently expand our operations as customer demand for our products
increases.
- RESEARCH AND DEVELOPMENT. Our research and development team has a proven
record of innovation and development of technological solutions for our
customers. We are able to quickly leverage our innovations into
commercially viable products for new markets.
- INTELLECTUAL PROPERTY. The development and protection of our intellectual
property is an integral part of our corporate philosophy. We believe that
we have the most patents relative to the use of flexible graphite in fuel
cells and other applications. We believe that our intellectual property
gives us a competitive advantage.
- STRONG CUSTOMER RELATIONSHIPS. We believe that our customers view us as
the supplier of choice, due in part to our superior technical service,
long-term customer support and joint product and application development
efforts.
OUR BUSINESS STRATEGIES
As a global, technology driven company, we intend to pursue the development
and commercialization of highly engineered products. The following are principal
components of our business and growth strategy:
- capitalize on our relationship with Ballard in order to participate in
the commercialization of PEM fuel cell technology,
- innovate through research and development,
- identify and develop growth opportunities and increase market awareness
of our products by demonstrating product capability and performance that
exceed our customers' expectations,
- pursue strategic alliances that we believe will enhance and complement
our existing businesses and accelerate growth opportunities across a wide
range of markets, and
- aggressively protect our intellectual property through patents and
carefully maintained trade secrets.
------------------
GRAFTECH is a Delaware corporation that was formed in April 2000. Our sole
subsidiary was formed in August 1999 to hold substantially all of the assets and
liabilities of UCAR's worldwide natural graphite business. We are headquartered
at 11709 Madison Avenue, Lakewood, Ohio 44107. The main telephone number of our
headquarters is (216) 529-3777. We maintain a web site at
http://www.ucar.com/graphtech. Information contained on our web site is not part
of this prospectus.
GRAFTECH, the GRAFTECH logo, UCAR Graph-Tech, the UCAR Graph-Tech logo,
GRAFOIL(R), GRAFCELL(TM), GRAFSHIELD(TM), GRAFGUARD(R), GRAFOAM(TM),
GRAFKOTE(R), ADVANCED MULTIWRAP(TM), EXPANDOGRAF(R) and SUPER GTO(TM) are our
trademarks and trade names. This prospectus also contains trademarks and trade
names belonging to other parties.
2
<PAGE> 6
THE OFFERING
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<S> <C>
Common stock offered by us................... shares
Common stock offered by the selling
stockholder................................ shares
Total................................... shares
Common stock to be outstanding after this
offering................................... shares
Use of proceeds.............................. To invest in the growth and expansion of our
business, fund working capital, and for
general corporate purposes. We will not
receive any proceeds from the sale of shares
by the selling stockholder.
Proposed Nasdaq National Market symbol....... "GRAF"
Risk factors................................. You should carefully consider all information
set forth in this prospectus and, in
particular, you should evaluate the specific
factors set forth under "Risk Factors" before
purchasing any shares.
</TABLE>
The number of shares of our common stock that will be outstanding after
this offering excludes shares reserved for issuance under our 2000
Employee Equity Incentive Plan and shares reserved for issuance under
our 2000 Outside Directors Equity Incentive Plan, under which an aggregate of
shares are subject to options that become effective on the date of
this prospectus at an exercise price equal to the initial public offering price.
It also excludes shares reserved for issuance in respect of options
issued by UCAR International in the event of a distribution by UCAR
International of shares of our common stock held by it to its stockholders.
3
<PAGE> 7
SUMMARY FINANCIAL DATA OF UCAR GRAPH-TECH INC.
The following summary financial data at December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 have been
derived from the audited Financial Statements of UCAR Graph-Tech Inc. appearing
elsewhere in this prospectus. The summary financial data at December 31, 1995,
1996 and 1997 and for each of the years in the two-year period ended December
31, 1996 are unaudited and have been derived from our financial records and
include all adjustments which, in the opinion of management, are necessary to
present such financial data in accordance with generally accepted accounting
principles. All of the following summary financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and related notes
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1995 1996 1997 1998 1999
------- ----------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (UNAUDITED)
----------------------
Net sales.............................. $34,020 $36,448 $37,680 $37,589 $33,782
Gross profit........................... 13,333 14,331 15,580 15,658 12,345
Research and development............... 613 782 1,012 1,326 1,534
Selling, administrative and other
expenses............................. 3,668 3,500 3,720 3,462 4,680
Operating profit....................... 9,048 9,372 10,632 10,970 6,099
Net income............................. 5,324 5,514 6,258 6,459 3,583
Pro forma net income per share.......................................................
Weighted average shares outstanding..................................................
BALANCE SHEET DATA (AT PERIOD END): (UNAUDITED)
---------------------------------
Cash................................... $ 129 $ 0 $ 0 $ 152 $ 18
Total assets........................... 19,822 23,768 24,094 23,199 24,171
Total debt............................. 0 0 0 0 0
Stockholder's equity................... 9,229 13,494 11,443 10,406 12,668
OTHER DATA:
Gross profit margin.................... 39.2% 39.3% 41.3% 41.7% 36.5%
Capital expenditures................... $ 1,296 $ 4,588 $ 1,825 $ 1,005 $ 2,326
</TABLE>
4
<PAGE> 8
RISK FACTORS
You should carefully consider the following risks and all other information
contained in this prospectus before purchasing any shares. If any of the
following risks occur, our business, prospects, results of operations or
financial condition could be harmed. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.
FACTORS AFFECTING OUR COMPANY AND INDUSTRY
THE USE OF FUEL CELL SYSTEMS IN THE TRANSPORTATION AND PORTABLE POWER
MARKETS MAY NEVER DEVELOP OR MAY TAKE LONGER TO DEVELOP THAN WE ANTICIPATE.
Fuel cells and fuel cell systems represent an emerging technology, and we
do not know whether end-users will want to use them. The development of a mass
market for fuel cells and fuel cell systems may be affected by many factors,
some of which are out of our control, including:
- the possibility that fuel cells will be subject to future state and
federal regulations,
- the emergence of alternative solutions and technologies,
- the future cost of hydrogen and other fuels used in fuel cell systems,
- the failure to develop a commercially viable fuel storage system,
- the lack of, or slow development of, a fuel delivery system
infrastructure,
- consumer perceptions about the safety of fuel cells and fuel cell
systems,
- changes in environmental laws and regulations that call for less
stringent or alternative emissions requirements than currently
legislated, and
- potential consumer reluctance to try new products.
If a mass market fails to develop or takes longer to develop than we
anticipate, our prospects could suffer.
EVEN IF A MARKET FOR FUEL CELLS DEVELOPS, WE CANNOT ASSURE YOU THAT
BALLARD'S PRODUCT WILL GAIN ACCEPTANCE IN THE MARKETPLACE.
Ballard may never complete the development of a commercially viable fuel
cell or fuel cell system. Due to our exclusive supply arrangement with Ballard,
we rely on Ballard's commitment to develop, market and produce a competitive
product. Ballard may have difficulty in implementing its technology or may
decide not to pursue the development of fuel cell technology at all. Ballard may
also be unable to produce PEM fuel cell systems that are competitive with other
technologies in terms of price, reliability and longevity. If Ballard is unable
or unwilling to commercialize a reliable and cost-effective fuel cell, our
prospects could suffer.
BALLARD MAY SEEK NEW SUPPLY SOURCES IF NEW OR BETTER TECHNOLOGY IS FOUND.
Our prospects depend heavily on our relationship with Ballard. It is
possible that the advanced flexible graphite products that we provide Ballard
will not continue to meet the technical requirements of Ballard's fuel cells or
will be replaced with alternative materials or products. If we are unable to
meet Ballard's needs or one of our competitors is better able to meet those
needs, our relationship with Ballard could be placed into jeopardy. The loss of
Ballard as a customer could negatively affect our prospects.
OUR GROWTH PLAN DEPENDS ON INTRODUCING NEW TECHNOLOGY TO EXISTING MARKETS.
THE MARKETS WE HAVE IDENTIFIED MAY NOT UTILIZE OUR PRODUCTS.
In addition to fuel cells, our growth plan depends on opportunities in:
- thermal management applications for computers and other electronic
devices,
5
<PAGE> 9
- fire protection applications in construction and building materials,
- energy management applications in devices such as batteries and
supercapacitors, and
- heat management applications in high temperature industrial furnaces.
It is possible that we may not develop viable products or some or all of
our products may not gain commercial acceptance in some or all of these
identified markets. In such case, our prospects could be negatively affected.
Even if our products gain commercial acceptance in these markets, our products
could be displaced by unknown or new technologies, which could have a negative
impact on our business.
OUR FAILURE TO PROTECT AND OBTAIN INTELLECTUAL PROPERTY RIGHTS COULD
ADVERSELY AFFECT OUR FUTURE GROWTH AND PROFITABILITY.
Failure to protect our existing intellectual property rights may result in
the loss of the exclusive right to use our technologies. We rely on patent,
trademark and trade secret law to protect our intellectual property. The issued
patents that we have obtained to date will expire between 2004 and 2018. Some of
our intellectual property is not covered by any patent or patent application.
Our patent position is subject to complex factual and legal considerations and
there can be uncertainty as to the validity, scope and enforceability of any
particular patent. Accordingly, we cannot assure you that:
- any of the U.S. or foreign patents owned by us, or other patents that
third parties may license to us in the future, will not be invalidated,
circumvented, challenged, adjudged unenforceable or licensed to others,
or
- any of our pending or future patent applications will be issued with the
breadth of claim coverage sought by us, if at all.
In addition, effective patent, trademark and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries.
Our ability to maintain certain proprietary intellectual property may be
achieved in part by prosecuting claims against others who we believe are
infringing our rights and by defending against claims of intellectual property
infringement brought by others. Our involvement in intellectual property
litigation could result in significant expense to us, adversely affecting the
development of sales of the challenged material or product and diverting the
efforts of our technical and management personnel, regardless of the outcome of
such litigation.
We also seek to protect our proprietary intellectual property, including
intellectual property that may not be patented or patentable, in part by
confidentiality agreements and, if applicable, inventors' rights agreements with
our strategic partners and employees. We cannot assure you that these agreements
will not be breached, that we will have adequate remedies for any breach or that
such persons or institutions will not assert rights to intellectual property
arising out of these relationships.
If necessary or desirable, we may seek licenses under the patents or other
intellectual property rights of others. However, we can give no assurances that
we will obtain such licenses or that the terms of any offered licenses will be
acceptable to us.
The failure to obtain a license from a third party for intellectual
property we use at present could cause us to incur substantial liabilities and
to suspend the manufacture or shipment of products or our use of processes
requiring the use of such intellectual property.
OUR BUSINESS COULD SUFFER IF WE HAVE DIFFICULTY MANAGING OUR FUTURE
EXPANSION OR IF WE ARE UNABLE TO ATTRACT OR RETAIN KEY PERSONNEL.
We intend to grow by developing new advanced flexible graphite products for
customers in new markets. We intend to increase the size of our facilities and
expand the geographic scope of our operations. Our net sales could suffer if we
fail to effectively manage our growth. Our planned expansion also will require a
significant increase in the number of our employees. Our future success,
therefore, will depend in part on attracting and retaining additional qualified
management and technical personnel. Our
6
<PAGE> 10
inability to hire qualified personnel on a timely basis, or the departure of key
employees, could harm our expansion plans.
THE AUTOMOTIVE, CHEMICAL AND PETROCHEMICAL INDUSTRIES MAY FIND ALTERNATIVE
TECHNOLOGY.
Our current net sales consist almost entirely of sales of our products to
customers in the automotive, chemical and petrochemical industries. It is
possible that our flexible graphite products could be displaced by other
technology in current markets. If customers in these markets find an alternate
product to ours, our business will suffer.
OUR BUSINESS DEPENDS ON THE CONTINUED AVAILABILITY OF RAW MATERIALS AND
ENERGY SUPPLIES AT REASONABLE PRICES.
We purchase our raw materials and energy from a variety of sources. We
currently have no long-term purchase contracts with respect to any raw materials
or energy. We depend on the continued availability of raw materials at
reasonable prices. Our business may suffer if there is a substantial increase in
raw materials or energy prices which cannot be mitigated or passed on to our
customers or if there is a prolonged interruption in the supply of natural
graphite.
WE ARE SUBJECT TO RIGOROUS COMPETITION IN EXISTING MARKETS, AND OUR BASIC
BUSINESS HAS RELATIVELY LOW BARRIERS TO ENTRY BY ADDITIONAL COMPETITORS.
The flexible graphite business is highly competitive. The capital
requirements to begin the production of flexible graphite are relatively small.
In the markets we historically have served, competition is based primarily on
price. Some of our competitors have, and some of our future competitors may
have, greater financial, marketing and other resources than we do. Our business,
results of operations and financial condition could be materially adversely
affected if competition prevents us from maintaining or increasing prices,
volumes or net sales, or requires significant increases in spending on research
and development, marketing or sales and customer service.
HEALTH AND ENVIRONMENTAL COMPLIANCE COSTS AND LIABILITIES RELATING TO OUR
MANUFACTURING OPERATIONS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
Our operations and properties are subject to increasingly stringent laws
and regulations relating to health and environmental protection, including laws
and regulations governing air emissions, water discharges, waste management and
workplace safety. These laws and regulations can impose substantial fines and
criminal sanctions for violations and require the installation of costly
pollution control equipment or operational changes to limit pollution emissions
and decrease the likelihood of accidental injuries or hazardous substance
releases. We incur, and expect to continue to incur, capital and operating costs
to comply with these laws and regulations.
We use and generate hazardous substances and wastes in our manufacturing
operations. In addition, the properties on which we operate are and have been
used for industrial purposes. Accordingly, we also may be subject to potentially
material liabilities relating to the investigation and cleanup of contaminated
properties, and to claims alleging personal injury or property damage as the
result of exposures to, or releases of, hazardous substances. In addition,
stricter enforcement of existing laws and regulations, new laws and regulations,
discovery of previously unknown contamination or imposition of new or increased
requirements could require us to incur costs or become the basis of new or
increased liabilities that could have a material adverse effect on our business,
financial condition or results of operations.
7
<PAGE> 11
RISKS RELATED TO OUR RELATIONSHIP WITH UCAR
UCAR WILL CONTROL US FOLLOWING THIS OFFERING.
Following this offering, we will continue to be a subsidiary of UCAR, which
will own about % of our common stock outstanding after this offering. As
long as UCAR owns a majority of our outstanding common stock, UCAR will be able
to elect our entire Board of Directors and to remove any director, with or
without cause, without calling a meeting of stockholders. Investors in this
offering will not be able to affect the outcome of any stockholder vote. As a
result, UCAR will have the ability to control all matters affecting us,
including:
- through its ability to elect and remove our entire Board of Directors,
determining our business strategies and policies, including the
appointment and removal of officers,
- identifying and allocating business opportunities that may be suitable
for us and UCAR,
- our participation in mergers or other business combinations,
- our acquisition or disposition of assets,
- our financing,
- any change to the agreements between us and UCAR, and
- any payment of dividends on our common stock.
We intend to enter into a stockholder's agreement with UCAR prior to this
offering which will provide to UCAR registration, major transaction approval,
director nomination and other rights. So long as UCAR owns at least 20% of our
outstanding common stock, UCAR is not prohibited from selling a controlling
interest in us to a third party.
OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR
RESULTS OF OPERATIONS, FINANCIAL CONDITION OR CASH FLOW AS A SEPARATE COMPANY.
The Financial Statements have been carved out from the consolidated
financial statements of UCAR using the historical results of operations and
historical bases of the assets and liabilities of UCAR's business that we
comprise. Accordingly, the historical financial information that we have
included in this prospectus does not necessarily reflect what our financial
condition, results of operations and cash flows would have been if we had been a
separate stand-alone entity at the dates and during the periods presented. UCAR
did not account for us, and we were not operated, as a separate, stand-alone
entity for the periods presented. Our costs and expenses include allocations
from UCAR for centralized corporate services and infrastructure costs,
including:
<TABLE>
<S> <C>
- - legal, - distribution,
- - accounting, - customer service,
- - treasury, - sales,
- - real estate, - marketing, and
- - information technology, - engineering.
- - research and development,
</TABLE>
This historical financial information is not necessarily indicative of what
our results of operations, financial condition and cash flows will be in the
future. We have not made adjustments to this historical financial information to
reflect many significant changes that may occur in our cost structure, funding
and operations as a result of any separation from UCAR, including increased
costs associated with reduced economies of scale, increased marketing expenses
related to building a company brand identity separate from UCAR, and increased
costs associated with being a publicly traded, stand-alone company.
8
<PAGE> 12
WE WILL NOT BE ABLE TO RELY ON UCAR TO FUND OUR GROWTH, AND WE MAY NOT BE
ABLE TO FIND OTHER FINANCING ON FAVORABLE TERMS OR AT ALL.
After this offering, UCAR will not be required and does not intend to
provide funds to finance our working capital or other cash requirements. We
believe that our capital requirements will vary from quarter to quarter,
depending on factors such as capital expenditures, fluctuations in our results
of operations, financing activities, acquisitions, and fluctuations in inventory
levels and receivables collections. We may require or choose to obtain
additional debt or equity financing in order to finance acquisitions, capital
expenditures or other activities. Future equity financings would be dilutive to
the holders of our common stock then outstanding. Future debt financings could
involve restrictive covenants that would limit our operating flexibility. We may
not be able to obtain financing with favorable interest rates or other terms, or
at all. If adequate financing is not available or is only available on
unfavorable terms, we may be unable to maintain or expand our business, take
advantage of future opportunities or respond to competitive pressures, any of
which could have a material adverse effect on our business, results of
operations or financial condition.
MANY OF OUR DIRECTORS AND EXECUTIVE OFFICERS MAY HAVE CONFLICTS OF INTEREST
BECAUSE OF THEIR OWNERSHIP OF UCAR COMMON STOCK.
Many of our directors and executive officers have substantial investments
in UCAR common stock and options to purchase UCAR common stock. Their ownership
of UCAR common stock and options to purchase UCAR common stock could create
potential conflicts of interest when they are faced with decisions that could
have different implications for UCAR and us.
IF THE TRANSITIONAL SERVICES BEING PROVIDED TO US BY UCAR ARE NOT
SUFFICIENT TO MEET OUR NEEDS OR IF WE ARE NOT ABLE TO REPLACE THESE SERVICES
AFTER OUR AGREEMENTS WITH UCAR TERMINATE, WE MAY BE UNABLE TO MANAGE OUR
BUSINESS.
UCAR is currently providing transitional services to us, including services
related to:
- information technology systems,
- human resources administration,
- intellectual property, and
- legal, finance and accounting.
Although UCAR has agreed to provide us with these services, these services
may not be provided at the same level as when we were part of UCAR. The
agreements relating to these services have terms of one year and automatically
renew at the expiration of each term unless terminated by either party at the
end of such term. After the termination of these agreements, we may not be able
to replace these transitional services on terms and conditions, including cost,
as favorable as those we expect to receive from UCAR.
FACTORS AFFECTING THIS OFFERING
WE MAY BE SUBJECT TO LITIGATION IF OUR STOCK PRICE IS VOLATILE.
The stock market has from time to time experienced extreme price and volume
fluctuations. Many factors may cause the market price for our common stock to
decline, perhaps substantially, following this offering, including:
- failure to meet product development and commercialization goals,
- net sales and results of operations failing to meet the expectations of
securities analysts or investors,
- downward revisions in securities analysts' estimates or changes in
general market conditions,
- technological innovations by others,
9
<PAGE> 13
- investor perception of our industry or our prospects, or
- general technology or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
could be involved in a securities class action litigation in the future. Such
litigation could result in substantial costs and a diversion of management's
attention and resources.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price per share will be substantially higher
than the net tangible book value per share immediately after this offering. If
you purchase shares in this offering, you will incur dilution of approximately
$ per share from the price per share you paid based on a pro forma as adjusted
net book value per share of $ .
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT ITS MARKET PRICE.
Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower the market price of our common stock or make it difficult for us to raise
additional equity financing in the future. After this offering, we will have
shares of our common stock outstanding. Of these shares, the
shares sold in this offering will be freely tradeable. All of the remaining
shares are subject to 180-day lock-up agreements. All of these remaining
shares are held by UCAR, and UCAR will have the right to require us to register
these remaining shares. Accordingly, all of these remaining shares may be
available for sale in the public market 180 days after the date of this
prospectus.
In addition, after this offering, we also intend to register the
shares of our common stock reserved for issuance under our 2000 Employee Equity
Incentive Plan and our 2000 Outside Directors Equity Incentive Plan. UCAR will
have the right to require us to register the shares reserved for issuance
in respect of options issued by UCAR International in the event of a
distribution by UCAR International of shares of our common stock held by it to
its stockholders. Issuance of all of these reserved shares are also subject to
180-day lock-up agreements.
We cannot predict whether future sales of our common stock, or the
availability of our common stock for future sale, will harm the market price for
our common stock or our ability to raise capital by offering equity securities.
ABSENCE OF A PRIOR PUBLIC MARKET FOR OUR COMMON STOCK.
Our common stock is a new issue of securities for which there is currently
no trading market. Although we expect our common stock to be quoted on The
Nasdaq National Market, an active trading market for our common stock may not
develop or be sustained following this offering. If you purchase shares in this
offering, you may not be able to resell your shares at prices equal to or
greater than the initial public offering price. The initial public offering
price will be determined through negotiations between us and the underwriters
and may not be indicative of the market price for our common stock following
this offering.
CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CHARTER, BYLAWS AND AGREEMENTS
WITH UCAR MAY MAKE A TAKEOVER OF US MORE DIFFICULT. THIS MAY ADVERSELY AFFECT
THE MARKET PRICE FOR OUR COMMON STOCK.
We are subject to the antitakeover provisions of Section 203 of the
Delaware General Corporation Law. Section 203 could delay or prevent a third
party or a significant stockholder from acquiring control of us. In addition,
provisions of our charter, bylaws and agreements with UCAR may have the effect
of discouraging, delaying or preventing a merger, tender offer or proxy contest
involving us, even if such transaction would be beneficial to our stockholders.
In addition, our Board of Directors intends to adopt a stockholder rights plan
which may have the same effect. Neither these provisions nor our stockholder
rights plan will apply to transactions involving UCAR.
10
<PAGE> 14
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements that reflect our
current expectations and projections about our future results, performance,
prospects and opportunities. In some cases, you can identify these statements by
forward-looking words such as "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "should", "will", "would" and similar expressions.
These forward-looking statements are based on information currently available to
us and are subject to a number of risks, uncertainties and other factors that
could cause our actual results, performance, prospects or opportunities to
differ materially from those expressed in, or implied by, these forward-looking
statements. These risks, uncertainties and other factors include:
- the future of our business, technologies, products or activities,
- the markets for our products,
- our growth, results of operations or financial position in the future,
and
- other factors set forth under "Risk Factors" in this prospectus.
You should not place undue reliance on any forward-looking statements.
Except as otherwise required by federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed circumstances or any
other reason after the date of this prospectus.
DIVIDEND POLICY
It is the current policy of our Board of Directors to retain earnings to
finance the further expansion and continued growth of our business. We do not,
therefore, intend to pay any cash dividends on our common stock for the
foreseeable future. Any future determination regarding the payment of dividends
will be within the sole discretion of our Board of Directors and will depend
upon, among other things, our earnings, results of operations, financial
condition, current and anticipated cash needs, and restrictions under any loan,
credit, stockholder or other agreement to which we are a party.
GRAFTECH is a holding company and it derives all of its cash flow from our
subsidiary. Consequently, its ability to pay cash dividends is dependent upon
the earnings of our subsidiary and the distribution of those earnings to it. The
distributions of those earnings will be subject to restrictions under applicable
corporate laws and any loan, credit or other agreement to which our subsidiary
is a party.
11
<PAGE> 15
DILUTION
Dilution is the amount by which the initial public offering price paid by
the purchasers of shares in this offering will exceed the net tangible book
value per share of our common stock after this offering. The net tangible book
value per share of our common stock is determined by subtracting our total
liabilities from the total book value of our tangible assets and dividing the
difference by the number of shares of our common stock deemed to be outstanding
on the date as of which the book value is determined.
At December 31, 1999, we had net tangible book value of $ million and
net tangible book value per share of our common stock of $ . Assuming that
the sale of the shares in this offering had occurred on December 31, 1999 at an
initial public offering price of $ per share (which is the mid-point of the
estimated price range on the cover of this prospectus) and after deducting the
underwriting discount and estimated offering expenses payable by us, the net
tangible book value at December 31, 1999 would have been about $ million or
$ per share of our common stock. This represents an immediate increase in
net tangible book value of $ per share held by existing stockholders.
Immediate dilution to the purchasers of shares in this offering would have been
as set forth in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value at December 31, 1999.............. $
Increase attributable to purchase of shares in this
offering...............................................
Net tangible book value per share after this offering.......
---
Dilution per share to purchasers of shares in this
offering.................................................. $
===
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the difference between existing stockholders and new investors with
respect to the number of shares of our common stock purchased, the total
consideration paid and the average price per share paid. Our only existing
stockholder is UCAR. The following table assumes that the initial public
offering price will be $ per share. If the over-allotment option is
exercised in full, the percentage of the total number of shares of our common
stock outstanding held by UCAR will decrease from % to % of the total
number of shares of our common stock outstanding after this offering, and the
percentage of the total number of shares of our common stock outstanding held by
new investors will increase from % to % of the total number of shares
of our common stock outstanding after this offering.
<TABLE>
<CAPTION>
AGGREGATE
SHARES ACQUIRED CONSIDERATION PAID
----------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholder.................. % $ % $
Purchasers of shares in this
offering............................
----- ----- -----
Total....................... 100% $ 100%
===== ===== =====
</TABLE>
12
<PAGE> 16
USE OF PROCEEDS
The net proceeds we will receive from the sale of the shares of our common
stock offered by us in this offering are estimated to be about $ million, at
an assumed initial public offering price of $ per share (which is the
mid-point of the range on the cover of this prospectus) and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. The principal uses of the net proceeds to us from this offering are:
- about $7.0 million to finance equipment for proprietary manufacturing
capabilities at our Parma, Ohio facility to produce products for Ballard
and other customers, installation of which began in the first quarter of
2000 and is expected to be completed in the first quarter of 2001,
- about $2.0 million to invest in the growth and expansion of our business,
including the purchase of proprietary flake treating and other equipment,
and
- the balance to fund working capital and for general corporate purposes,
including other capital expenditures.
In addition, we may use a portion of the net proceeds we receive from this
offering to acquire or invest in complementary businesses or technologies,
including, for example, joint ventures, strategic alliances or licensing
arrangements. We do not currently have any pending commitments or agreements to
make any such acquisitions or investments, except for a memorandum of
understanding regarding possible development of an additional raw material
source in Canada. Pending their use, the net proceeds we receive from this
offering will be invested in short-term, investment grade, interest-bearing
instruments, certificates of deposit or direct or guaranteed obligations of the
United States government.
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling stockholder.
13
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of UCAR Graph-Tech Inc.
at December 31, 1999 on an actual basis and as adjusted to reflect the formation
of our holding company, the sale by us of the shares of our common
stock offered by us at an assumed initial public offering price of $ per
share and the initial application of the net proceeds to us therefrom. The
information set forth below is qualified by and should be read in conjunction
with the Financial Statements and related notes thereto included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 18 $
======= ========
Debt........................................................ $ -- $ --
======= ========
Stockholders' equity:
Common stock, $.01 par value; 1,000 shares authorized, 100
shares issued at December 31, 1998 and 1999............ -- --
Divisional equity......................................... 12,668 --
Preferred stock, $0.01 par value; 20,000,000 shares
authorized; none issued................................ --
Common stock, $0.01 par value; 200,000,000 shares
authorized; shares issued and outstanding,
actual; and issued and outstanding, as
adjusted............................................... --
Additional paid-in-capital................................ --
Retained earnings......................................... --
------- --------
Total stockholders' equity........................ 12,668
------- --------
Total capitalization.............................. $12,668 $
======= ========
</TABLE>
In addition, shares have been reserved for issuance under our
2000 Employee Equity Incentive Plan and our 2000 Outside Directors Equity
Incentive Plan, under which an aggregate of shares are subject to
options that become effective on the date of this prospectus, and
shares have been reserved for issuance in respect of options issued by UCAR
International in the event of a distribution by UCAR International of shares of
our common stock held by it to its stockholders.
14
<PAGE> 18
SELECTED FINANCIAL DATA OF UCAR GRAPH-TECH INC.
The following selected financial data at December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 have been
derived from the audited Financial Statements of UCAR Graph-Tech Inc. appearing
elsewhere in this prospectus. The following selected financial data at December
31, 1995, 1996 and 1997 and for each of the years in the two-year period ended
December 31, 1996 are unaudited and have been derived from our financial records
and include all adjustments which, in the opinion of management, are necessary
to present such financial data in accordance with generally accepted accounting
principles. All of this data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (UNAUDITED)
------------------
Net sales............................... $34,020 $36,448 $37,680 $ 37,589 $33,782
Gross profit............................ 13,333 14,331 15,580 15,658 12,345
Research and development................ 613 782 1,012 1,326 1,534
Selling, administrative and other
expenses.............................. 3,668 3,500 3,720 3,462 4,680
Operating profit........................ 9,048 9,372 10,632 10,970 6,099
Net income.............................. 5,324 5,514 6,258 6,459 3,583
------- ------- ------- -------- -------
Pro forma net income per share.....................................................
Weighted average shares outstanding................................................
BALANCE SHEET DATA (AT PERIOD END): (UNAUDITED)
-----------------------------
Cash.................................... $ 129 $ 0 $ 0 $ 152 $ 18
Total assets............................ 19,822 23,768 24,094 23,199 24,171
Total debt.............................. 0 0 0 0 0
Stockholder's equity.................... 9,229 13,494 11,443 10,406 12,668
Working capital......................... 3,060 3,956 1,601 1,179 2,547
OTHER DATA:
Gross profit margin..................... 39.2% 39.3% 41.3% 41.7% 36.5%
Capital expenditures.................... $ 1,296 $ 4,588 $ 1,825 $ 1,005 $ 2,326
</TABLE>
15
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
At the time we founded our business, we were an unincorporated business
within the Carbon Products Division of Union Carbide Corporation. In 1989, the
Carbon Products Division was separated from Union Carbide's other businesses and
contributed to UCAR Carbon Company Inc., a wholly-owned subsidiary of Union
Carbide. UCAR Carbon was subsequently contributed to UCAR International, which
became a public company in 1995.
We remained a division of UCAR until January 2000, at which time UCAR
transferred substantially all of the assets and liabilities related to its
worldwide natural graphite business to UCAR Graph-Tech, our wholly-owned
subsidiary. GRAFTECH was incorporated in April 2000 and will be the holding
company for UCAR Graph-Tech.
All financial information (including allocations of overhead, taxes and
other expenses) at dates and for periods prior to this offering were prepared as
if we had operated as a separate stand-alone entity at those dates and for those
periods. We believe that the allocation methods used were reasonable.
BUSINESS BACKGROUND
About 80% of our net sales are derived from sales of our products in North
America. The balance of our net sales is derived from sales in Western Europe
and the Far East. To date, our principal products have consisted of flexible
graphite sold primarily for use in gaskets and other sealing applications in the
automotive, chemical and petrochemical industries.
During the past 18 months, we refocused our business strategy to
concentrate on the growth opportunities in the fuel cell and other new markets.
We have increased our research and development efforts in the fuel cell and
other new markets, and will continue to expand support of our efforts to grow
sales of our products in these markets.
We incur manufacturing costs and sell our products primarily in United
States dollars. As a result, our results of operations and financial condition
are not affected to any material extent by changes in currency exchange rates.
Since we serve markets worldwide, we are impacted in varying degrees as local or
regional conditions fluctuate, affecting demand for our products.
16
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in
the Statements of Operations and the increase or decrease (expressed as a
percentage of such item in the comparable prior period) of such items:
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE
(DECREASE)
------------
FOR YEARS ENDED DECEMBER 31, 1997 1998
----------------------------- TO TO
1997 1998 1999 1998 1999
------- ------- ------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.................................... $37,680 $37,589 $33,782 0.2% (10.1)%
Cost of sales................................ 22,100 21,931 21,437 (0.8) (2.3)
------- ------- -------
Gross profit................................. 15,580 15,658 12,345 0.5 (21.2)
Research and development..................... 1,012 1,326 1,534 31.0 15.7
Selling, administrative and other expenses... 3,720 3,462 4,680 (6.9) 35.2
Other expense (income), net.................. 216 (100) 32 N/M N/M
------- ------- -------
Operating profit............................. $10,632 $10,970 $ 6,099 3.2 (44.4)
======= ======= =======
</TABLE>
- ---------------
N/M: Not Meaningful
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items in the Statements of Operations:
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 58.7 58.3 63.5
----- ----- -----
Gross profit................................................ 41.3 41.7 36.5
Research and development.................................... 2.7 3.5 4.5
Selling, administrative and other expenses.................. 9.8 9.3 13.8
Other expense (income), net................................. 0.6 (0.3) 0.1
----- ----- -----
Operating profit............................................ 28.2% 29.2% 18.1%
===== ===== =====
</TABLE>
1999 COMPARED TO 1998. Net sales in 1999 were $33.8 million, a decrease of
$3.8 million, or 10.1%, from net sales in 1998 of $37.6 million. Gross profit in
1999 was $12.3 million, a decrease of $3.3 million, or 21.2%, from gross profit
in 1998 of $15.7 million. Gross profit margin in 1999 was 36.5% of net sales as
compared to gross profit margin in 1998 of 41.7% of net sales. The decrease in
net sales was primarily due to a decline in the average prices of our gasket and
sealing products. The average price of our sealing products sold to the internal
combustion market was nearly 10% lower in 1999 than in 1998. Average prices of
our other products also declined, but to a lesser extent. The volume of products
sold increased slightly and the product mix was relatively stable in 1999 as
compared to 1998. The decline in prices was primarily due to competitive
pressures. Reductions in raw material costs due to lower prices, alternate
sources of supply and improvements in operations resulted in a reduction of $0.5
million in cost of sales in 1999 as compared to 1998, even though there was a
slight increase in volume of products sold. Gross profit and gross profit margin
declined in 1999 as compared to 1998 because both the dollar amount of the
decrease and the percentage decrease in net sales exceeded both the dollar
amount of the reduction and the percentage reduction in cost of sales.
Research and development expenses increased $0.2 million, or 15.7%, to $1.5
million in 1999 from $1.3 million in 1998, reflecting our commitment of
additional resources to implement our new strategic
17
<PAGE> 21
focus. We believe that, in 2000, these expenses will continue to increase due to
our commitment to innovation and commercialization of our solutions and
products.
Selling, administrative and other expenses increased $1.2 million, or
35.2%, to $4.7 million in 1999 from $3.5 million in 1998, primarily due to
increases in personnel and increased resources devoted to strategic planning and
commercialization efforts. In 1999, we added five employees involved in these
activities, which accounted for most of the increase. We believe that, in 2000,
these expenses will increase due to increased support for our commercialization
efforts.
Operating profit was $6.1 million, or 18.1% of net sales, in 1999 as
compared to $11.0 million, or 29.2% of net sales, in 1998. The decrease in
operating profit was due to lower gross profit and to higher selling,
administrative and other expenses and higher research and development expenses.
Provision for income taxes was $2.5 million for 1999 as compared to $4.5
million for 1998. During both years, the provision for income taxes reflected a
41% effective income tax rate. This is higher than the U.S. federal income tax
rate of 35%, primarily as a result of the impact of state and local income
taxes.
As a result of the changes described above, net income was $3.6 million in
1999, a decrease of $2.9 million from $6.5 million in 1998.
1998 COMPARED TO 1997. Net sales in 1998 were $37.6 million, substantially
the same as net sales in 1997 of $37.7 million. The impact of a 2% decline in
average prices of our gasket and sealing products was substantially offset by an
increase in the volume of those products sold. The volume and average prices of
our other products sold, and cost of sales of all products, was relatively
stable in 1998 as compared to 1997. As a result, gross profit in 1998 was $15.7
million, substantially the same as gross profit in 1997 of $15.6 million. Gross
profit margin in 1998 was 41.7% of net sales as compared to gross profit margin
in 1997 of 41.3% of net sales.
Research and development expenses increased $0.3 million, or 31.0%, to $1.3
million in 1998 from $1.0 million in 1997, primarily due to an increase in
activities with our strategic partner, Ballard.
Selling, administrative and other expenses were $3.5 million in 1998, an
improvement of $0.2 million over 1997.
Operating profit was relatively stable at $11.0 million, or 29.2% of net
sales, in 1998 as compared to $10.6 million, or 28.2% of net sales, in 1997.
Provision for income taxes was $4.5 million for 1998 as compared to $4.4
million for 1997. During both years, the provision for income taxes reflected a
41% effective income tax rate. This is higher than the U.S. federal income tax
rate of 35%, primarily as a result of the impact of state and local income
taxes.
As a result of the changes described above, net income was $6.5 million in
1998, an increase of $0.2 million from $6.3 million in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since January 1, 1997, cash flow from operations has constituted our
principal source of funds. For the past five years, we have had positive annual
cash flow from operations. We are seeking to improve, among other things, our
cash flow from operations in 2000 through improvements in production scheduling,
inventory management, cash management and accounts payable and receivable
management. Improvements in cash flow from operations in 2000 resulting from
these efforts are being partially offset by the associated cash implementation
costs.
We believe that our cash flow from operations and existing capital
resources, combined with the net proceeds to us from this offering and our
efforts to reduce costs, improve efficiencies and generate growth and earnings,
will enable us to implement our business strategies and meet our obligations as
they become due for at least the next year. To the extent that demand for our
products grows faster than anticipated, we could be required to obtain
additional funds to finance expansion of manufacturing capacity.
18
<PAGE> 22
CASH FLOW PROVIDED BY OPERATING ACTIVITIES. Cash flow provided by
operations was $3.5 million in 1999 as compared to cash flow provided by
operations of $8.6 million in 1998. This decrease of $5.1 million resulted
primarily from higher use of cash for working capital of $2.1 million, lower net
income of $2.9 million and increased use of cash associated with long term
assets and liabilities of $0.4 million in 1999.
Use of cash flow for working capital was $1.5 million in 1999, which was
$2.1 million more than the $0.6 million of cash flow provided by working capital
in 1998. The increased use of working capital was due primarily to increases in
the use of cash of $2.7 million for taxes payable, $0.3 million for receivables
and $0.5 million for inventories, partially offset by reductions in the use of
cash of $0.8 million for payables and accruals.
CASH FLOW USED IN INVESTING ACTIVITIES. We used $2.3 million of cash flow
in investing activities during 1999 as compared to $1.0 million during 1998.
This increase of $1.3 million was primarily due to an increase in cash used for
capital expenditures.
CASH FLOW USED IN FINANCING ACTIVITIES. Cash flow used in financing
activities was $1.3 million in 1999 as compared to cash used in financing
activities of $7.4 million in 1998. These uses reflected distributions of cash
to UCAR. We intend to obtain a line of credit to enhance our liquidity.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 133, "Accounting for Derivative Instruments and
Hedging Activities," which is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. This statement establishes accounting and
reporting standards for derivative instruments. This statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
do not currently utilize any derivative financial instruments.
YEAR 2000 ISSUE
The Year 2000 issue resulted from the fact that many computer programs were
written using two rather than four digits to define the applicable year. Any
computer programs that have time-sensitive software could have recognized a date
using "00" as the year 1900 rather than the year 2000. We did not experience any
such material errors, miscalculations or failures affecting us or our critical
suppliers, service providers or customers. We estimate that we incurred an
aggregate incremental cost of about $0.2 million for internal and external
services in connection with Year 2000 issues.
COSTS RELATING TO PROTECTION OF THE ENVIRONMENT
We have been, currently are and will continue to be subject to increasingly
stringent environmental protection laws and regulations. In addition, we have an
ongoing commitment to rigorous internal environmental protection standards. The
following table sets forth certain information regarding environmental expenses
and capital expenditures.
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Expenses relating to environmental protection............... $2,066 $1,308 $1,446
Capital expenditures related to environmental protection.... $ 112 $ 429 $ 403
</TABLE>
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have significant exposure to market risks from changes in
interest rates and currency exchange rates.
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BUSINESS
INTRODUCTION
We are the world leader in the development and manufacture of high quality,
natural graphite based products. We provide our customers with highly engineered
solutions and products for use in diverse applications in a wide range of
industries. As the founder of the flexible graphite industry, we are building on
our long history of developing products for automotive and industrial sealing
applications to capitalize on the commercialization of fuel cell technology and
expand into other markets.
OPPORTUNITIES FOR FUEL CELLS. We have been working with Ballard Power
Systems since 1992 on developing advanced flexible graphite products for use as
flow field plates in PEM fuel cells. As part of our ongoing relationship, we
developed GRAFCELL(TM) products for use in flow field plates for Ballard(R) fuel
cells. In 1999, we entered into exclusive long-term agreements to supply Ballard
with our GRAFCELL(TM) products for use in Ballard(R) fuel cells and to
collaborate on future development of advanced flexible graphite products for use
in flow field plates. Ballard is the world leader in developing, manufacturing
and marketing zero-emission PEM fuel cells that generate electricity for
transportation, stationary and portable power applications. We believe that fuel
cell components made with our GRAFCELL(TM) products, together with Ballard's
leading technology, will contribute to the commercial viability of fuel cells in
the transportation and portable power markets.
EMERGING OPPORTUNITIES. We are leveraging technologies developed in our
work with Ballard and in our independent research and development efforts to
generate new opportunities in:
- thermal management applications for computers and other electronic
devices,
- fire protection applications in construction and building materials,
- energy management applications in devices such as batteries and
supercapacitors, and
- heat management applications in high temperature industrial furnaces.
We believe that our solutions and products will create new applications and
replace existing technologies due to their superior performance and
cost-competitive nature, presenting us with growth opportunities.
OUR STRENGTHS
We have developed technological and operating strengths that we believe
give us a competitive advantage.
HISTORY OF PRODUCT AND SOLUTION INNOVATION. We founded our business and
the flexible graphite industry in 1963, and have a history of industry
leadership bringing innovative natural graphite-based products that provide
technological solutions to market. Since then, we have identified many new
applications for which our products can offer advantages in performance and
cost. In the 1970s, we introduced GRAFOIL(R) flexible graphite sheet as a
replacement for asbestos in high temperature gasket applications. In the 1980s,
we successfully marketed the use of GRAFOIL(R) sheet as a superior gasket for
automotive engine applications. In the 1990s, we began developing natural
graphite-based products and solutions for applications in fuel cells,
electronics and construction and building materials. We believe that our
knowledge and technology base will continue to allow us to identify new growth
opportunities.
EXCLUSIVE SUPPLY AND COLLABORATION AGREEMENTS WITH BALLARD. In 1999, we
entered into exclusive long-term agreements to supply Ballard with our
GRAFCELL(TM) products for use in flow field plates in Ballard(R) fuel cells and
to collaborate on further development of advanced flexible graphite products.
Ballard's Mark 900 fuel cell stack, which utilizes our GRAFCELL(TM) products,
features a power density increase of almost 30%, occupies about half the space
and weighs 30% less than Ballard's previous automotive fuel cell. Ballard has
publicly characterized our relationship as a "Ballard Fuel Cell Milestone." Our
supply agreement with Ballard provides that Ballard will buy from us all of its
flexible graphite products for use
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in flow field plates for PEM fuel cells and that we will provide these flexible
graphite products for use in flow field plates only to Ballard. We have
developed a strong relationship with Ballard, which we believe will allow us to
capitalize on the commercialization of fuel cell technology in the
transportation and portable power markets.
PROCESS TECHNOLOGY AND MANUFACTURING EXCELLENCE. Our proprietary process
technology allows us to scale our capacity and modify our products to meet our
customers' unique requirements. We believe that we are the only manufacturer
that chemically processes all of its natural graphite flake. This permits us to
precisely control the properties and quality of our products and reduces cycle
time, which we believe gives us a competitive advantage. We believe that our
process technology will enable us to efficiently expand our operations as
customer demand for our products increases. We are currently installing
proprietary manufacturing capabilities at our Parma, Ohio facility, at a cost of
about $7 million, to produce advanced flexible graphite products for Ballard and
other customers.
RESEARCH AND DEVELOPMENT. Our research and development team has a proven
record of developing technological solutions for our customers and will allow us
to quickly leverage our innovations into commercially viable products for new
markets. About 17 percent of our 70 salaried employees are devoted to research
and development, and about forty percent of that team are Ph.D. scientists. Our
research and development efforts are centered in UCAR's product and process
development center in Parma, Ohio, which is recognized as one of the leading
carbon and graphite research and development centers in the world. As a result,
we believe that we are well-positioned to provide highly engineered solutions to
a wide range of industries.
INTELLECTUAL PROPERTY. The development and protection of our intellectual
property is an integral part of our corporate philosophy. We currently hold 99
issued patents and over 260 pending patent applications and perfected patent
application priority rights worldwide. These patent rights include 17 issued
patents and 90 pending patent applications and perfected patent application
priority rights worldwide in the fuel cell technology area. These patent rights
also include patents and pending patent applications in:
- thermal management applications for computers and other electronic
devices,
- fire protection applications in construction and building materials,
- energy management applications in devices such as batteries and
supercapacitors,
- heat management applications in high temperature industrial furnaces, and
- high temperature sealing applications.
Our trademarks include those for our GRAFOIL(R), GRAFCELL(TM),
GRAFSHIELD(TM), GRAFGUARD(R) and ADVANCED MULTIWRAP(TM) product lines. We
believe that our intellectual property gives us a competitive advantage.
STRONG CUSTOMER RELATIONSHIPS. We believe that our customers view us as
the supplier of choice, due in part to our superior technical service, long-term
customer support and joint product and applications development efforts. As a
measure of our dedication to technical innovation, quality and customer service,
we have received numerous supplier recognition awards, including Supplier of the
Year honors from divisions of Federal Mogul Corporation and Dana Corporation.
OUR BUSINESS STRATEGIES
As a global, technology driven company, we intend to pursue the development
and commercialization of highly engineered products. The following are principal
components of our business and growth strategy:
CAPITALIZE ON OUR RELATIONSHIP WITH BALLARD. We intend to capitalize on
our exclusive long-term supply and collaboration agreements with Ballard in
order to participate in the commercialization of PEM fuel cell technology. We
also believe that our long-term alliance with Ballard will allow us to benefit
from continued research and development breakthroughs in the fuel cell as well
as other markets.
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INNOVATE THROUGH RESEARCH AND DEVELOPMENT. We believe that our experience
in developing and producing products for the automotive, chemical and
petrochemical industries has positioned us to take advantage of new
opportunities. We continually enhance our understanding of natural
graphite-based materials and the relationship between process conditions and
product properties. We have active programs in place to develop products with
special thermal and electrical properties, which we believe will allow our
products to be used in new markets. In addition to the advances in materials for
flow field plates in PEM fuel cells, we are developing a flexible graphite-based
fuel cell gas diffusion layer, which allows distribution of reactant gases and
electric currents within the fuel cell. We intend to remain a leader in
technological solutions for these and other products by furthering our research
and development efforts, both on a stand-alone basis and through strategic
alliances.
IDENTIFY AND DEVELOP GROWTH OPPORTUNITIES AND INCREASE MARKET
AWARENESS. Leveraging our manufacturing and process technology strengths, we
are focusing on the development of new applications using specialized natural
graphite-based products. These applications include thermal applications for
computers and other electronic devices, fire protection applications in
construction and building materials, energy management applications in devices
such as batteries and supercapacitors and heat management applications in high
temperature industrial furnaces. We seek to identify technologies where our
products can offer unique advantages in performance and cost over current
products. We will continue to work closely with customers to develop and test
products that we believe will allow us to be first to market. We are in
discussions with various electronic and building materials companies relating to
innovative solutions and products that we believe will result in our penetration
into these large markets. We also intend to create greater market awareness for
our products by demonstrating product capability and performance that exceed our
customers' expectations and are superior to those of competing technologies. We
anticipate that the attributes of our new products will allow us to identify
related applications for our natural graphite-based solutions.
IDENTIFY AND DEVELOP STRATEGIC ALLIANCES. We are pursuing strategic
alliances that we believe will enhance and complement our existing businesses
and accelerate growth opportunities across a wide range of markets. We believe
that these alliances will leverage our strengths and enable us to expedite
product development and commercialization, leading to increased sales, cash flow
and earnings. Our strategic alliances may take the form of joint ventures,
licensing agreements, supply agreements or other arrangements. Our relationship
with Ballard exemplifies one type of alliance we are pursuing.
AGGRESSIVELY PROTECT OUR INTELLECTUAL PROPERTY. We will continue to
protect our technology through patents and carefully maintained trade secrets.
As we develop new applications and products, we will apply for patents and
trademark registrations to protect our rights. We believe that an active policy
of protecting intellectual property is an important component of our technology
leadership strategy. This policy provides us with a level of exclusivity that
enhances the rewards of being first-to-market, thereby enabling us to achieve a
competitive advantage.
PRODUCTS
We produce expandable graphite, flexible graphite and advanced flexible
graphite products. The versatility of our proprietary processes and equipment
enables us to modify our natural graphite-based products to meet a variety of
customer specifications. We work with our customers to develop technologically
advanced solutions, utilizing our knowledge and expertise in expandable
graphite, flexible graphite and advanced flexible graphite.
EXPANDABLE GRAPHITE. We use a proprietary process to convert natural
graphite flake into expandable graphite. During this process, we can manufacture
expandable graphite with a number of specific properties. For example, by
changing expandable graphite's sensitivity to temperature, modifying its
particle size and imparting long-term stability in the product, we created
GRAFGUARD(R) graphite flake for use in fire protection applications. The
expansion property of our GRAFGUARD(R) graphite flake is the basis for its use
in a growing number of fire retardant applications. Expanding up to 250 times
its original
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thickness, the graphite flake generates a thick, non-burnable insulating layer
that retains the superior heat resistance of graphite.
FLEXIBLE GRAPHITE. We produce flexible graphite from expandable graphite
flake, and can further fabricate the flexible graphite into a variety of sheet,
laminate and tape products. Flexible graphite is lightweight, conformable,
temperature-resistant and inert to most chemicals. Due to these characteristics,
it is an excellent sealing material that has been used primarily in high
temperature and corrosive environments in the automotive, chemical and
petrochemical industries. For example, automotive applications for our flexible
graphite products include head gaskets and exhaust gaskets as well as engine and
exhaust heat shields. We market our flexible graphite products under our
GRAFOIL(R) brand name.
ADVANCED FLEXIBLE GRAPHITE. We produce advanced flexible graphite by
subjecting expandable or flexible graphite materials to additional proprietary
processing. These additional processing steps alter the properties and
characteristics of flexible graphite to make materials with modified electrical,
thermal and strength characteristics. Advanced flexible graphite can be used in
the production of PEM fuel cell flow field plates, thermal management
applications for computers and other electronic devices, energy management
applications in devices such as batteries and supercapacitors, and heat
management applications in high temperature industrial furnaces. We market our
advanced flexible graphite products under our GRAFCELL(TM) brand for fuel cell
applications and under our GRAFSHIELD(TM) brand for high temperature industrial
furnace applications.
OUR APPLICATIONS AND MARKETS
We are developing our expandable graphite, flexible graphite and advanced
flexible graphite products for use in:
- fuel cell applications in the transportation and power industries,
- thermal management applications for computers and other electronic
devices,
- fire protection applications in construction and building materials,
- energy management applications in devices such as batteries and
supercapacitors,
- heat management applications for high temperature industrial furnaces,
and
- sealing applications in the automotive, chemical and petrochemical
industries.
FUEL CELL APPLICATIONS IN THE TRANSPORTATION AND POWER INDUSTRIES. One of
our emerging market opportunities is in the area of power generation using fuel
cells. The advantages of using our advanced flexible graphite in fuel cell
applications such as flow field plates include its high electrical conductivity,
its light weight, its corrosion resistance and its cost effectiveness. We also
are developing a flexible graphite-based gas diffusion layer, which controls the
distribution of reactant gases and electric currents within the fuel cell.
[Diagram of PEM fuel cell stack]
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Introduction to PEM fuel cells. A PEM fuel cell is an environmentally
clean power generator that produces electricity from hydrogen and oxygen,
without combustion, giving off heat and water as the only by-products. PEM fuel
cells are suitable for, among other things:
- transportation applications such as cars, buses and trucks,
- use by independent power producers and utilities in stationary power
applications, including distributed or on-site power generation for
commercial, industrial or residential uses, standby power and electricity
at remote locations, and
- portable applications such as portable power generators, scientific
monitoring and control instrumentation at remote sites, auxiliary power
and other specialty applications.
[Diagram of individual fuel cell]
A fuel cell consists of two flow field plates and a membrane electrode
assembly. The flow field plates direct the flow of gases within the fuel cell,
disperse waste heat and capture and transmit the electricity generated by the
fuel cell. The membrane electrode assembly consists of two electrodes, the anode
and the cathode, separated by a solid polymer electrolyte membrane. The
electrodes, also referred to as gas diffusion layers, are usually made of porous
carbon materials that are coated on one side with a thin platinum catalyst
layer. Hydrogen fuel dissociates into free electrons and protons in the presence
of the platinum catalyst at the anode. The free electrons are conducted in the
form of usable electric current through an external circuit. The protons migrate
through the polymer membrane to the cathode, where another flow field plate
directs oxygen from air and electrons from the external circuit to combine with
hydrogen protons to produce water and heat.
[Photograph of flow field plate
using GRAFCELL(TM) product]
Ballard(R) fuel cells. We have been actively working with Ballard since
1992 on developing solutions based on our proprietary advanced flexible graphite
material for use as flow field plates in PEM fuel cells. We developed our
GRAFCELL(TM) products for use in Ballard(R) fuel cells currently being developed
for automotive applications. As part of this relationship, in 1999 we entered
into exclusive long-term supply and collaboration agreements with Ballard. Our
supply agreement with Ballard provides that Ballard will buy from us all of its
flexible graphite products for use in flow field plates for PEM fuel cells and
that we will provide these flexible graphite products for use in flow field
plates only to Ballard.
In January 2000, Ballard unveiled its next generation fuel cell stack, the
Mark 900, at the North American International Auto Show in Detroit, Michigan.
Ballard's Mark 900 fuel cell stack, which utilizes our GRAFCELL(TM) products,
features a power density increase of almost 30%, occupies about half the
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space and weighs 30% less when compared to Ballard's previous automotive fuel
cell stack. Ballard has announced that the Mark 900 will be the architecture
initially used for Ballard's automotive applications.
Ballard's target applications for PEM fuel cells are in the transportation,
stationary and portable power markets. Applications include cars, trucks, buses,
power plants and generators. Ballard has developed prototype products that it
believes meet or exceed the performance specifications required in these
markets. Together with its alliance partners and associated companies, Ballard
plans to bring to market its first portable power products in 2001, its first
transit bus engines in 2002 and its first automobile engines between 2003 and
2005.
Transportation market. Currently, manufacturers of automobiles, buses and
other vehicles are searching for a viable alternative to the internal combustion
engine. Deficiencies of the internal combustion engine are the inherent
pollution associated with the internal combustion engine and the perceived
limited supply of oil reserves. PEM fuel cells provide the power of the internal
combustion engine, with few of its negative attributes. Like the internal
combustion engine, the PEM fuel cell engine uses fuel from an external source,
but it produces power more quietly, with less vibration and with a 50% increase
in fuel efficiency. Additionally, when pure hydrogen is used as a fuel, a PEM
fuel cell system produces no air pollutants.
Another possible alternative to the internal combustion engine involves the
use of battery technology. PEM fuel cell powered vehicles, however, are more
convenient to operate than battery powered vehicles. The refueling process for
fuel cell powered vehicles is similar to that for the internal combustion
engine, and power is produced as long as fuel is supplied. In contrast,
batteries for fuel cell powered vehicles only operate as power storage devices
and have a long recharging process.
Ballard has formed an alliance with DaimlerChrysler AG and Ford Motor
Company, two of the industry leaders. Ballard and these alliance partners formed
XCELLSIS GmbH, which is developing and commercializing PEM fuel cell systems for
cars, buses and trucks. DaimlerChrysler and Ford have made a substantial
commitment to fuel cell technology. This, in turn, has led to intensified
interest in fuel cells to power passenger cars. DaimlerChrysler, Ford, Toyota,
Renault and General Motors have each exhibited prototype vehicles and announced
plans to begin production on vehicles featuring fuel cell systems.
We believe, based on statements by Ballard's customers and other automobile
manufacturers, that initial commercial sales of PEM fuel cells for use in
automobiles will occur between 2003 and 2005. Ballard(R) fuel cells also have
been supplied to General Motors, GTE Peugeot SA-Renault CEA, Honda, Hyundai
Motor Company, Mazda Motor Company, Nissan, Volkswagen AG and AB Volvo. In
addition, General Motors, Honda, Mazda and Nissan have used Ballard(R) fuel
cells to power their prototype vehicles. Some of these companies are developing
their own PEM fuel cells or PEM fuel cell systems. We believe that there are
significant market opportunities for PEM fuel cell vehicles, and that the
strength of these markets will be supported by regulatory pressures for cleaner,
lower-emission vehicles. In 1999, J.D. Power and Associates estimated that in
1998 global production of automobiles and light vehicles was about 52 million
units. According to a report by Polk Data Registration, in 1998 there were about
15.3 million new automobile and light truck registrations in the United States.
About 2.8 million of these automobiles and light trucks were registered in
California, New York, Massachusetts and Maine, which have adopted strict vehicle
emissions standards.
Public authorities have been examining clean air technologies to improve
air quality within their jurisdictions. Federal transit/highway legislation
adopted in 1998 authorized grants of up to $200 million per year for five years
for the purchase of clean-fuel buses, including those powered by fuel cells.
Federal Clean Air Act regulations to overcome noncompliance with national
ambient air quality standards for ozone and other pollutants are placing
increasing demands on vehicle manufacturers to reduce emissions. Such
regulations include requirements that a manufacturer's vehicle sales as a fleet
meet non methane organic gas (NMOG) limitations. Increasing sales of low and
zero emission vehicles assist manufacturers in meeting these requirements. The
State of California has obtained agreement from the seven leading
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vehicle manufacturers that beginning in 2003, zero emission vehicles will
comprise 2% of their annual California sales of cars and light duty trucks, will
increase to 5% of such annual California sales in 2005 and will ultimately
increase to 10% of such annual California sales starting in 2008.
A number of prototype fuel cell powered vehicles have demonstrated the fuel
cell's compelling combination of performance, range and low to zero-emissions
over the last four years. Seven of the world's ten leading automobile companies
have announced that they intend to begin production of fuel cell vehicles
between 2003 and 2005. Of these seven companies, five are either partners or
customers of Ballard. Many automobile companies have launched plans to enter the
emerging zero-emission automobile market. During 1998, Ballard(R) fuel cells
were demonstrated and tested in several prototype vehicles.
Ballard, through XCELLSIS, has been developing prototype bus engines for
the transit bus market for zero-emission fuel cell engines, and expected that
the initial commercial use of its PEM fuel cells in vehicles would be in transit
buses. In April 2000, DaimlerChrysler announced plans to supply 20 to 30
Mercedes-Benz Citaro City buses powered by Ballard(R) fuel cells by 2003.
Zero-emission Ballard(R) fuel cells already have been used by the Chicago
Transit Authority and British Columbia Transit in two fuel cell bus field tests,
each involving three buses powered by these fuel cells. On March 23, 2000, the
Chicago Transit Authority completed its testing program.
Portable power market. We believe that the same characteristics that make
flexible graphite attractive for use in automotive applications will make it
attractive for portable power applications. Portable power generators can be
used to power a number of products including household appliances and electronic
equipment. PEM fuel cells are useful in the portable power market because they
are compact, lightweight, quiet and have high fuel efficiency. Ballard has
recently entered into an agreement with Coleman Powermate, Inc., a leader in
outdoor portable power markets, to develop and market portable generators using
PEM fuel cell technology.
THERMAL MANAGEMENT APPLICATIONS FOR COMPUTERS AND OTHER ELECTRONIC
DEVICES. Advances in microchip technology require higher electrical power,
leading to increased heat generation in computers and other electronic devices.
Through our work with manufacturers in this sector, we have developed advanced
flexible graphite solutions that we believe will help meet these
heat-dissipation and component design challenges. We expect that our products'
superior ability to manage heat will allow engineers to redesign electronics to
reduce cost, size and weight while improving performance. Our advanced flexible
graphite offers many advantages over competitive products in the market for
mobile communications and other electronic devices, as compared to aluminum or
copper. These advantages include their:
- excellent ability to conduct heat,
- mechanical and thermal stability,
- lightweight, compressible and conformable nature,
- cost competitiveness, and
- ease of handling.
Our advanced flexible graphite can be used in computer products,
telecommunications equipment, analytical instruments and other electronic
devices. The Gartner Group has projected that 50.1 million computers will be
sold in the United States in 2000, growing to 77 million computers projected to
be sold in 2003. By the end of 1999, according to The Gartner Group, nearly 475
million people subscribed to cellular services worldwide. It is expected that
1.6 billion people will subscribe to cellular services worldwide by 2004,
according to The Gartner Group, and that the number of handsets worldwide will
increase from 283 million units to 993 million units between 1999 and 2004.
Applications for computers and other electronic devices include thermal
interface and other heat management applications. Competing products for thermal
applications for computers and other electronic
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devices include metals such as aluminum, copper and stainless steel; conductive
rubber; conductive polyolefins; and fiber composites (carbon and graphite
fibers).
We believe that our years of expertise and focus on technology within the
flexible graphite market and the advantages of advanced flexible graphite
relative to competing products position us to penetrate the market for
electronic devices. Our targeted customers for thermal applications are leading
computer and semiconductor chip manufacturers.
FIRE PROTECTION APPLICATIONS IN CONSTRUCTION AND BUILDING MATERIALS. Our
GRAFGUARD(R) expandable graphite flake is a fire retardant additive for
materials that require improved fire protection characteristics, including wood
products, foam, plastics and other construction and building materials.
Expandable graphite can be used to improve the performance of traditional fire
retardant additives, including phosphates, halogens and nitrogen compounds. We
believe that the growing use of expandable graphite will be driven by
increasingly stringent performance requirements for fire retardant materials.
We are the only U.S. manufacturer of expandable graphite flake for fire
retardant applications. We believe that our continuous manufacturing process
produces expandable graphite with consistent properties to meet the needs of the
construction and building material industries.
One market for GRAFGUARD(R) expandable graphite is in engineered wood
products. Oriented strandboard, one of these products, is the most widely used
engineered wood product, with sales of about 20 billion square feet in North
America in 1999. Applications for oriented strandboard products include roofing,
siding, flooring and wood I-beams. The American Plywood Association estimates
that nearly 900 million linear feet of oriented strandboard will be used in wood
I-beams in 2000. The lack of a suitable fire retardant oriented strandboard
product, especially in wood I-beams, has limited the use of oriented strandboard
in residential and commercial applications where certain fire resistance is
required. Recently, several manufacturers of wood products, including
Georgia-Pacific Corporation and J.M. Huber Corporation, have included expandable
graphite in patented formulations that can be used to protect engineered wood
products.
Manufacturers of foam products used in seating, mattresses and construction
insulation panels also are under pressure to improve the fire resistance of
their products. These foam products are highly flammable and can produce dense,
toxic smoke during a fire. Our GRAFGUARD(R) product expands when heated,
creating a non-burnable protective layer and making it an effective additive for
polymer foam applications. There are significant markets for fire retardant foam
products. A study by Chemical Market Resources indicated that the United States
and Canada are expected to use over 900 million pounds of rigid polyurethane
foam for building construction in 2000. Flexible foams for furniture and carpet
backing are expected to account for another 1.2 billion pounds of flexible
polyurethane foam.
ENERGY MANAGEMENT APPLICATIONS IN DEVICES SUCH AS BATTERIES AND
SUPERCAPACITORS. We have modified the performance characteristics of our
natural graphite materials to provide solutions for energy management
applications. Natural graphite performs better than synthetic graphite in
alkaline and lithium-ion batteries, and it also may prove useful as a highly
conductive component of supercapacitors.
Graphite powders are a critical component of alkaline batteries, since they
provide the electrical conductivity necessary to give the best battery
performance. In alkaline batteries, powders made from expanded natural graphite
serve to extend battery life. Rechargeable lithium-ion batteries are used in a
growing number of portable electronics applications, including laptop computers
and cellular telephones. Lithium-ion batteries can store more power and be
recharged more times than other battery technologies. According to Paumanok
Publication Industrial Research Center, the worldwide battery market was about
$22 billion in 1999, with lithium-ion batteries accounting for about $2.0
billion. Both expanded graphite powder and advanced flexible graphite sheet may
potentially be used as anodes in lithium-ion batteries. We have United States
patents and patent applications that cover proprietary processes and materials
for using our advanced flexible graphite products in lithium-ion batteries.
The emergence of supercapacitors is based on the need for energy storage
devices in the electronics industry. Capacitors have been used for years in
electrical circuits to store small amounts of charge and
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regulate the flow of current. Supercapacitors are now being developed that can
store thousands of times more power in a smaller space, and can be recharged
hundreds of thousands of times. The high capacitance of a supercapacitor can be
used:
- to replace more expensive lithium-ion batteries in low voltage
applications,
- in addition to a battery to provide pulse discharge in high voltage
applications, or
- alone as a battery replacement for certain power applications in both low
and high voltage applications.
According to Paumanok Publications Industrial Research Center, worldwide
consumption of supercapacitors totaled approximately $115 million in 1999. As
they proceed to widespread commercialization, supercapacitors will be used in
power regulation, as backup power sources, and in power storage. We are
presently working to develop advanced flexible graphite materials that can be
used to replace the porous carbon materials used in current generation
supercapacitors.
HEAT MANAGEMENT APPLICATIONS IN HIGH TEMPERATURE INDUSTRIAL FURNACES. We
estimate that components and insulation for high temperature furnaces will be a
$600 million market in the United States in 2000. We believe that our engineered
advanced flexible graphite products can provide superior heat management
solutions for insulation packages, induction furnaces, high temperature vacuum
furnaces and direct solidification furnaces. The prime advantage of the use of
our products is extended furnace life, resulting in decreased downtime and
increased customer productivity. Other advantages include ease of fabrication
and installation, consolidation of operational components and reduction of
process impurities. Competitive products for industrial furnace insulation
include carbon and graphite, ceramics and temperature resistant metals.
SEALING APPLICATIONS IN THE AUTOMOTIVE, CHEMICAL AND PETROCHEMICAL
INDUSTRIES. We are the largest supplier of natural graphite-based products for
use in the automotive, chemical and petrochemical industries, and believe that
our GRAFOIL(R) brand is the most widely recognized flexible graphite brand in
the world. In automotive applications, GRAFOIL(R) is used for head gaskets,
exhaust gaskets, and as a component of engine and exhaust heat shields. In
industrial applications, GRAFOIL(R) is used for pipe flange gaskets and as valve
packings for chemical and petrochemical plants. These industrial sealing
products are widely recognized as being fire resistant and environmentally safe.
Federal Mogul currently is our largest customer for these sealing
materials, accounting for 33% of our net sales in 1999. In recognition of our
outstanding performance in quality, delivery and technical assistance, we were
awarded Supplier of the Year honors by a division of Federal Mogul Corporation
in 1998 and a division of Dana Corporation in 1999.
RESEARCH AND DEVELOPMENT
We focus our research and development efforts on applications where our
graphite technology can provide unique solutions and performance advantages for
our existing and future customers. Our scientists and engineers develop
technical solutions by combining their own specialized training and vision with
our expertise in the use, manipulation and adaptation of natural graphite-based
materials. We believe that we can leverage our capability in process technology
and our manufacturing excellence to efficiently and effectively transform our
ideas into commercially viable solutions.
Currently, about 17 percent of our 70 salaried employees are technical
professionals in our research and development group, including two Corporate
Fellows and six Ph.D. scientists. A significant portion of our research and
development efforts are focused on our alliance with Ballard. As we continue to
identify new market applications, we believe that our research and development
efforts will enable us to quickly leverage our technology, knowledge and
expertise across a variety of markets. We believe that our continued investment
in our technical staff is crucial to support our current development programs
and to position us for future growth. Research and development project teams are
currently working on
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applications in fuel cells, computers and other electronic devices, construction
and building materials, batteries and supercapacitors, and insulation for high
temperature industrial furnaces.
Our research and development efforts are centered in UCAR's product and
process development center in Parma, Ohio, which is recognized as one of the
leading carbon and graphite research and development centers in the world. That
facility has state-of-the-art equipment and instrumentation, pilot-scale
manufacturing and an extensive technical library. In 1999, our research and
development costs represented about 5% of our net sales.
We believe that our technology, experience, proprietary "know-how" and
intellectual property make us unique in the development of natural
graphite-based products. We believe that we are well positioned to provide
highly engineered solutions and products to technology intensive industries.
INTELLECTUAL PROPERTY
We believe that our innovative technology helps differentiate us from our
competitors. The protection of our technology through patents and carefully
maintained trade secrets is an integral part of our corporate philosophy.
PATENTS. Our policy is to aggressively seek worldwide patent coverage for
technological innovations developed by our research and development staff. We
continually evaluate the competitive benefits of seeking patent protection as
opposed to maintaining trade secrets. This policy helps ensure that we prevent
our competitors from making use of our proprietary technology. We currently hold
99 issued patents and over 260 pending patent applications and perfected patent
application priority rights worldwide. These patent rights and patent
applications include 17 issued patents and 90 pending patent applications and
perfected patent application priority rights worldwide in the fuel cell
technology area. These rights also include issued and pending patents in thermal
management applications for computers and other electronic devices, fire
protection applications in construction and building materials, energy
management applications in devices such as batteries and supercapacitors, heat
management applications in high temperature industrial furnaces and high
temperature sealing applications in the automotive, chemical and petrochemical
industries.
TRADEMARKS. We use trademarks to firmly identify our products in the
marketplace. Included among the trademarks we employ are GRAFOIL(R),
GRAFCELL(TM), GRAFSHIELD(TM), GRAFGUARD(R), GRAFOAM(TM), GRAFKOTE(R), ADVANCED
MULTIWRAP(TM), EXPANDOGRAF(R), and SUPER GTO(TM). We seek registration for our
trademarks wherever appropriate. For instance, our GRAFOIL(R) trademark has been
registered in over 30 countries.
TRADE SECRETS. We also have process and application technology and
"know-how" relating to the selection and treatment of natural graphite and the
production of flexible graphite products that we believe allow us to maintain a
technological advantage over our competitors. We maintain this proprietary
information as company trade secrets and implement policies to prevent
disclosure. Ongoing development programs are maintained in confidence, and
development programs undertaken with customers and suppliers are governed by
secrecy and joint development agreements. We require our employees to sign
confidentiality agreements relating to company information.
PROCESS TECHNOLOGY
We chemically process all of our natural graphite flake raw materials,
allowing us to precisely control the properties and quality of our finished
products. We manufacture our products in high volumes that meet a wide range of
customer specifications. We manufacture our products in a short period of time,
enabling us to maintain low levels of inventory. A large percentage of our
products is ordered and shipped within a 24-hour period.
EXPANDABLE GRAPHITE. We use sulfuric acid and oxidizing agents in a
continuous process to treat the natural graphite flake. The oxidizing agent
prepares the graphite flake so that the sulfuric acid can be introduced between
the layered planes of the graphite. The treated flakes are washed with water and
then
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<PAGE> 33
dried. After insertion of the sulfuric acid, the natural graphite has been
converted into expandable graphite. Expandable graphite can be further modified
to prepare it for applications in the construction and building materials
industries, or it can be used as the "raw" material for manufacturing flexible
graphite. Our continuous, high volume, computerized treating process is computer
monitored and controlled to ensure that the graphite flake products possess
consistent and precise properties.
FLEXIBLE GRAPHITE. The production of flexible graphite begins by heating
expandable graphite in a high temperature furnace. The sulfuric acid between the
layers of the graphite flake is instantly vaporized, which causes the flake to
expand on average from 150 to 250 times its original size. The expanded flake is
vermicular (wormlike) in shape and has a low density. It passes to a settling
chamber and is conveyed to a calendering line. The calendering process consists
of moving the graphite through a system of rollers that progressively compresses
the graphite into a thinner, higher density sheet. This process produces a
continuous sheet of flexible graphite that is rolled into coils as long as 5,000
feet. The rolling lines have the capability of producing a wide range of
products to meet customer specifications and requirements. Each line is
monitored and computer-controlled to ensure the production of consistent, high
quality materials. We hold process patents to manufacture ultra-thin flexible
graphites of less than .008 inches in thickness. We believe that this gives us a
competitive advantage in applications for fuel cells, electronic devices,
computers and other applications. We manufacture on a continuous, modular basis
to provide manufacturing flexibility which enables us to cost-effectively add
incremental capacity to meet market demands.
In the automotive, chemical and petrochemical industries, we perform
additional operations to complete the manufacture of the flexible graphite into
the specific form and shape desired by the customer. These operations include
cutting to specific shapes and laminating graphite to a wide range of metals,
plastic and other materials.
ADVANCED FLEXIBLE GRAPHITE. We produce advanced flexible graphite products
by modifying our manufacturing processes for expandable graphite as well as
standard flexible graphite. These proprietary modifications are designed to
yield unique products that can serve new applications for fuel cell, thermal
management, fire protection and energy management as well as new applications in
the existing internal combustion and chemical and petrochemical industries. The
modifications include the incorporation of certain additives and various
processing steps. We believe that we are the leader in our industry in
developing innovative products and solutions to problems for the markets we
serve. We are currently installing proprietary manufacturing capabilities at our
Parma, Ohio facility, at a cost of about $7.0 million, that will produce
advanced flexible graphite products for Ballard and others.
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<PAGE> 34
[Diagram of Manufacturing Process]
RAW MATERIALS
The primary raw material for the production of expandable and flexible
graphite products is natural graphite flake. Natural graphite flake exists in
many countries around the world. The U.S. Geological Survey, Mineral Commodity
Summaries, January 1999, reports a world reserve of over 16 million tons of
natural graphite and an inferred reserve exceeding 800 million tons of
recoverable natural graphite. We estimate that about 45% of these reserves are
in the flake form that we use as our raw material. U.S. Geological Survey
records indicate that the producers of natural graphite in China are
collectively the world's largest current suppliers. Other producers are located
in Canada, Madagascar, Zimbabwe, Russia, Ukraine, Brazil, Norway, South Korea
and India. We currently obtain natural graphite flake from several suppliers
through annual purchase contracts. World consumption of natural graphite flake
is reported to have been 0.3 million tons during 1998. The large majority of
natural graphite in the world is mined from open pit operations. The refining of
the materials that are mined varies depending on the host material for the
natural graphite, but in general is accomplished by crushing and milling
followed by water flotation to separate the natural graphite from the host
materials.
Historically, we have had no difficulty in procuring natural graphite flake
from a variety of producers, and do not anticipate material difficulties
procuring natural graphite in the future. In order to assure an adequate supply
of high-quality, low-cost natural graphite flake, we have entered into a
memorandum of understanding with Mazarin Mining Corporation Inc. relating to an
arrangement to develop and commercialize a natural graphite deposit located near
Fermont, Quebec, Canada. During the initial phase of the arrangement, we will
conduct a feasibility study, which is expected to cost about $2 million and to
be completed by the end of 2002. After completion of the study, we may decide to
commence commercial production of the deposit with Mazarin, exercise an option
to extend the period for the development decision for five one-year periods
until 2007, or terminate the arrangement. In the case of an extension, we will
have to make option payments totaling $5.0 million if the option period is
extended for the full five years. If a development decision is made, commercial
production could start as early as 2004. If a development decision is made, we
will have the right to obtain up to a 60 percent interest in the deposit. Upon
commencement of commercial production, we would enter into a long-term off-take
contract for the natural graphite flake at a predetermined price. We will have
the right to purchase the entire production of natural graphite flake from the
deposit. At full capacity, the deposit should produce about 50,000 tons of
natural graphite flake per year, making it one of the largest single sources of
natural graphite flake in the world. Consummation of the arrangement is subject
to, among other things, the negotiation and execution of definitive agreements,
completion of due diligence by the parties, and the receipt of any required
governmental approvals. As part of the memorandum of understanding, we will
purchase or assign to an affiliate the obligation to purchase two million shares
of Mazarin common stock in a private placement at a price of Cdn $1.09. Mazarin
will issue to the purchaser of the shares of Mazarin common stock warrants to
purchase up to one million shares of Mazarin common stock at a price of Cdn
$1.50.
The other principal materials used in the manufacture of our products,
including sulfuric acid, are readily available from various suppliers, with our
1999 usage being 0.2% of the current production levels in the United States.
SALES
Historically, our primary customers consisted of gasket manufacturers who
supply the internal combustion, chemical and petrochemical industries. We sell
our products to these customers in the United States through our direct sales
force who have an average of over eight years of experience with our products.
Currently, we have six direct field sales employees in the United States. Our
United States sales accounted for about 80% of our net sales in 1999. We sell
our products outside of the United States through one direct sales employee and
through independent sales agents and distributors. Most of these independent
sales agents and distributors have worked with us for over ten years. Our
customers outside of the United States are located primarily in Western Europe,
Canada and the Far East. We are presently expanding, and intend to continue to
expand, our international market presence through the use of select,
full-service distributors.
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We are establishing customer bases for applications in computers and other
electronic devices, construction and building materials and high temperature
industrial furnaces. We have hired additional employees to enhance our sales
efforts in these areas, and will continue to evaluate the need for additional
sales personnel. Other developing markets and strategic alliances are managed by
a combination of salespersons and/or members of management. As an example, our
work in support of Ballard is accomplished through a combination of technical
staff and senior management efforts.
Federal Mogul, a major supplier of gaskets and other sealing materials to
the automotive industry, is our largest customer. Federal Mogul, together with
the companies it acquired over the past three years, accounted for 36% of our
net sales in 1997, 33% of our net sales in 1998, and 33% of our net sales in
1999. Federal Mogul primarily purchases gasket facing material for use in the
manufacture of head gaskets and exhaust gaskets.
A large percentage of our customer orders are requested and shipped within
a 24-hour period. We ship our finished products to customers primarily by third
party truck lines and ocean vessels, using "just-in-time" techniques where
practicable. We generally store a limited amount of finished product at our
manufacturing facility in Lakewood, Ohio. We normally ship directly to customers
in North America and through agents in Japan, Korea, Taiwan and various
countries in Europe.
CUSTOMER SERVICE
We have a strong commitment to provide a high level of technical service to
our customers. We assist our customers in learning about and using our products,
improving their manufacturing processes and operations and solving their
technical dilemmas. We employ seven engineers and other technicians at our
facilities to provide both on and off site technical service. Our entire staff
of development scientists and manufacturing engineers is also available to
support customers as needed. We work closely with our customers to develop and
test prototype materials. We believe that this cooperation allows us to be first
to market. Our customer sales team coordinates sales, technology and
manufacturing efforts to meet customer needs. We have an excellent quality
assurance system designed to meet the most stringent requirements of our
customers. The system has been qualified and registered to the ISO-9002
international quality standard. We believe that our customer service is the best
in the industry and has proven to be a significant competitive advantage in
retaining existing customers and developing new customers.
COMPETITION
We believe that we are the largest manufacturer of flexible graphite in the
world, having supplied about 35% of the flexible graphite purchased worldwide,
excluding China, during 1999. The four other principal manufacturers of flexible
graphite are SGL Carbon Group, Le Carbone S.A. (Pty) Ltd., Hitachi Corporation
and Nippon Carbon Co., Ltd.
With respect to PEM fuel cell applications, our products compete with other
graphitic products including fibers, composites and synthetic graphite, and
metal-based products such as stainless steel. Our thermal management products
compete with a wide variety of materials, including copper and other metals,
ceramics, conductive rubbers and greases. Our fire protection products compete
with compounds containing phosphates, halogens and hydrated aluminas as well as
many other materials. Our sealing products compete with various fiber products
such as asbestos, cellulose and synthetic composites as well as stainless and
other metals.
Historically, competition with respect to products sold to the gasket and
sealing markets has been based primarily on price. In the markets for new
applications, competition is based primarily on innovation, product performance,
cost effectiveness and customer service, with the relative importance of these
factors varying among products and customers.
EMPLOYEES
At March 31, 2000, we had a total of 145 employees, of whom 70 employees
were salaried and 75 employees were hourly. Given the broad experience and
extensive know-how of our work force, we
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routinely involve employees from all disciplines in product innovation, process
improvement and quality assurance.
We believe that our relationship with our employees is excellent. We have
not been subject to any work stoppages and none of our employees is covered by a
collective bargaining agreement.
PROPERTIES
We operate in the following facilities, which are owned or leased as
indicated.
<TABLE>
<CAPTION>
LOCATION OF FACILITY PRIMARY USE OWNED OR LEASED SQUARE FEET
- -------------------- ------------------------------ --------------- -----------
<S> <C> <C> <C>
Lakewood, Ohio Headquarters, Manufacturing Leased 207,000
and Sales Office
Parma, Ohio Manufacturing Owned 29,000
Parma, Ohio Research and Development Leased 7,900
</TABLE>
ENVIRONMENTAL MATTERS
Our operations and properties are subject to increasingly stringent laws
and regulations governing health and environmental protection, including laws
and regulations governing air emissions, water discharges, waste management and
workplace safety. We believe that we are in material compliance with all such
laws and regulations that are applicable to our operations, and that costs and
liabilities associated with environmental laws will not materially affect us.
These laws and regulations can impose substantial fines and criminal
sanctions for violations and require the installation of costly pollution
control equipment or operational changes to limit pollution emissions and
decrease the likelihood of accidental injuries or hazardous substances releases.
We are negotiating with the Ohio Environmental Protection Agency (the "OEPA")
regarding alleged violations of permit requirements governing air emissions from
our Lakewood, Ohio facility. We believe that we have corrected the alleged
violations, that the OEPA will reduce its proposed fine of $117,600, and that,
in any event, this matter will not have a material adverse effect on our
business, results of operations or financial condition. In addition, current and
future requirements under the Clean Air Act may require us to incur costs to
limit air pollutant emissions when we modify existing equipment or install new
equipment. Although such costs could be significant, we do not believe that they
will materially affect us.
We use and generate hazardous substances and wastes in our manufacturing
operations. In addition, the properties on which we operate are, and in the past
were, used for industrial purposes. Accordingly, we could potentially be
required to investigate and clean up contamination at on-site locations or at
third party disposal sites. We could also be subject to claims alleging personal
injury or property damage as a result of exposure to, or release of, hazardous
substances. These requirements and claims could result in material costs and
liabilities. We are not currently conducting any remediation activities and do
not believe that costs or liabilities relating to on-site or off-site
contamination will materially affect us.
Estimates of future costs of health and environmental protection are
necessarily imprecise due to numerous uncertainties, including the impact of new
laws and regulations, the availability and application of new and diverse
technologies, the extent of insurance coverage, the identification of new
hazardous substance disposal sites at which we may be a potentially responsible
party and, in the case of sites subject to superfund and similar state laws, the
ultimate allocation of costs among potentially responsible parties and the final
determination of remedial requirements. Subject to the inherent imprecision in
estimating such future costs, but taking into consideration our experience to
date regarding environmental matters of a similar nature and facts currently
known, we believe that costs and capital expenditures (in each case, before
adjustment for inflation) for health and environmental protection will not
increase materially over the next several years.
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LEGAL PROCEEDINGS
We are involved in various investigations, lawsuits, claims and other legal
proceedings incidental to the conduct of our business. Among others, we
currently are involved in a wrongful termination lawsuit brought in Italy by a
former distributor. We are vigorously contesting this lawsuit. While it is not
possible to determine the ultimate disposition of each of these proceedings, we
believe that the ultimate disposition of these proceedings will not have a
material adverse effect on us.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers, their respective ages and their
positions with us as of the date of this prospectus are as follows.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Gilbert E. Playford.................................. 53 Chairman of the Board
John J. Wetula....................................... 41 Chief Executive Officer, President
and Director
</TABLE>
Prior to or promptly after this offering, we intend to appoint both
additional UCAR employees as directors and additional independent directors
sufficient to satisfy the independent director and audit committee requirements
for listing on The Nasdaq National Market. The Board of Directors of UCAR
International is currently evaluating the positions and compensation of the
members of our management team. This process will be completed prior to
commencement of this offering. At that time, this prospectus will be amended to
provide information regarding our other executive officers.
Gilbert E. Playford. Mr. Playford became Chairman of the Board of GRAFTECH
in April 2000. Since June 1998, he has been Chief Executive Officer, President
and a director of UCAR International. Since September 1999, Mr. Playford has
also been Chairman of the Board of UCAR International. From 1996 until June
1998, Mr. Playford was Chairman of the Board, Chief Executive Officer and
President of LionOre Mining International Ltd., a company which he founded. He
has continued as non-executive Chairman of the Board of LionOre Mining
International Ltd. since June 1998. From 1972 until 1996, Mr. Playford served in
various positions, including Vice President, Treasurer and Principal Financial
Officer, with Union Carbide.
John J. Wetula. Mr. Wetula became Chief Executive Officer, President and a
director of GRAFTECH in April 2000. He became President of UCAR Graph-Tech Inc.
in August 1999. From 1986 until August 1999, Mr. Wetula served in various
management, marketing and manufacturing positions, including General Manager,
within UCAR's flexible graphite business, except for a one year assignment in
UCAR's graphite electrode business. Mr. Wetula began his career in 1982 in the
Carbon Products Division of Union Carbide.
BOARD STRUCTURE AND COMPENSATION
Our Certificate of Incorporation provides that our Board of Directors may
be comprised of one to fifteen members. Commencing at such time as UCAR ceases
to own more than 20% of our outstanding common stock, our Board of Directors
will be divided into three classes serving staggered three-year terms. Our
Bylaws provide that our Board of Directors fixes the exact number of directors
comprising the entire Board of Directors at any time. Our Board of Directors has
currently fixed the number of directors at two.
Certain provisions of our Certificate of Incorporation and Bylaws may limit
the ultimate liability of directors and executive officers for breaches of
certain of their duties to us and our stockholders.
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EXECUTIVE OFFICER COMPENSATION
The following table sets forth information relating to compensation
received in 1999 by our chief executive officer and four of our other executive
officers who were our most highly compensated employees (other than our chief
executive officer) in 1999 and whose salary and bonus exceeded $100,000. All
information set forth in the following table reflects compensation earned by
these officers for services rendered in all capacities to UCAR in 1999,
substantially all of which services (unless otherwise indicated) were rendered
in connection with our business when it was a division of UCAR. The individuals
listed in the following table are sometimes called our "named executive
officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ---------------------- ------------
RESTRICTED SECURITIES LONG TERM
NAME AND VARIABLE OTHER ANNUAL STOCK UNDERLYING PLAN ALL OTHER
PRINCIPAL POSITIONS SALARY COMPENSATION COMPENSATIONS AWARDS OPTIONS PAYOUTS COMPENSATION
- ------------------- -------- ------------ ------------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Wetula, Chief
Executive Officer and
President..................
</TABLE>
The following table sets forth information relating to options to purchase
UCAR common stock granted by UCAR International to our named executive officers
during 1999.
UCAR INTERNATIONAL
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED IN 1999 PER SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Wetula.............
</TABLE>
None of our named executive officers exercised options to purchase UCAR
common stock during 1999.
2000 EMPLOYEE EQUITY INCENTIVE PLAN
Our 2000 Employee Equity Incentive Plan will be adopted by our Board of
Directors and approved by our sole stockholder. The plan is intended to assist
us in attracting, retaining and motivating highly qualified employees and to
make our compensation program competitive with those of other similarly situated
employers.
ADMINISTRATION. The plan is administered by our Board of Directors. It has
the right to interpret the plan, authorize awards to eligible participants, set
the vesting, transferability and other terms and conditions of awards, delegate
to the chief executive officer the right to grant awards to employees who are
not executive officers, establish administrative regulations to further the
purposes of the plan and take any other action necessary for the proper
implementation of the plan. Our Board of Directors has the right to delegate
administration of the plan to any committee of our Board of Directors.
PARTICIPATION. All of our employees serving in managerial, administrative
or professional positions are eligible to receive awards under the plan.
Participants receive awards to the extent granted as described above.
Participants in the plan are also eligible to participate in our other incentive
plans.
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<PAGE> 40
SHARES AVAILABLE FOR AWARDS. shares of our common stock have
been reserved for issuance under the plan, subject to adjustment for stock
splits, stock dividends, recapitalizations and similar events. Such shares may
consist in whole or in part of authorized and unissued shares or treasury
shares. If an award expires unexercised or is forfeited, surrendered or
cancelled, terminated or settled in cash in lieu of common stock, the shares
previously used for such awards will be available for future awards under the
plan. In addition, each time an award (other than an award of a qualified
incentive stock option ("ISO")) is exercised, the number of shares reserved for
issuance under the plan will automatically be increased by the number of shares
subject to the exercised portion of the award. No individual may be granted
awards under the plan which in the aggregate cover at any one time in excess of
shares and no more than shares may be issued upon exercise
of ISOs.
AWARDS. The plan permits grants of awards of such type and subject to such
terms and conditions as our Board of Directors may determine, including the
following types of awards: (i) options, including ISOs and non-qualified stock
options; (ii) stock appreciation rights ("SARs"); (iii) restricted stock; (iv)
stock equivalent units; (v) dividend equivalents; and (vi) performance units. No
award granted may have a term longer than ten years.
AWARDS GRANTED. We have granted non-qualified stock options covering
shares under the plan which will become effective on the date of this
prospectus. Each option has an exercise price equal to the initial public
offering price and vests as to of the shares covered by the option on
anniversary of the date of grant commencing with the
anniversary.
AWARD TERMS. To the extent that any award has an exercise price (or
similar provision), the exercise price (or similar provision) cannot be lower
than the fair market value of our common stock on the date of grant. For options
which will become effective on the date of this prospectus, such value equals
the initial public offering price. For awards which become effective
subsequently, such value is deemed to equal the closing sale price (or, if there
is no such price, the average of the highest bid and lowest asked prices) of our
common stock on the last trading day prior to the date of grant as reported by
the principal exchange or market on which our common stock is listed or traded.
Unless otherwise determined by our Board of Directors, awards may be
exercised after termination of employment only: (i) if the termination resulted
from a participant's death, disability or retirement with the right to receive a
non-actuarially reduced pension; (ii) during the three year period commencing on
the date of a participant's termination of employment by us other than for
cause; (iii) during the three year period commencing on the date of a
participant's termination of employment by us or the participant after a change
in control unless such termination is for cause; or (iv) if our Board of
Directors decides that it is in our best interests to allow exercise of an award
following a participant's termination of employment. In no event may an award be
exercised after the expiration date of the award.
If an SAR is awarded, upon exercise of the SAR the participant will receive
an amount equal to the excess of the fair market value of our common stock on
the settlement date over the award price of the SAR multiplied by the number of
shares as to which the SAR is exercised. SARs may be awarded either separately
or in conjunction with another award. The award price for (i) SARs awarded
separately is the fair market value of our common stock on the date the SAR is
awarded and (ii) an SAR awarded in conjunction with any other award is the fair
market value of our common stock on the date the associated award was made.
However, where an SAR is granted retroactively in tandem with or in substitution
for another award, the award price of the SAR will not be less than the fair
market value of our common stock on the date such other award was made. For
purposes of the limitation on the aggregate number of shares which may be issued
under the plan, only the number of shares actually issued in connection with the
exercise of an SAR is considered.
The exercise of an SAR granted in conjunction with another award terminates
that other award to the extent of the number of shares as to which the SAR is
exercised. Conversely, the exercise of that other award terminates the
associated SAR to the extent of the shares as to which that other award is
exercised. The exercise of an SAR awarded separately has no effect on the
exercisability of any other award and the exercise of any other award has no
effect on the exercisability of an SAR awarded separately.
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<PAGE> 41
In addition to options, SARs and restricted stock, our Board of Directors
may grant stock equivalent units, dividend equivalents and performance units. A
stock equivalent unit is a cash award in an amount equivalent to the fair market
value of a share of our common stock, which amount fluctuates with changes in
such fair market value. A performance unit is a cash award based on the
attainment over specified periods of individual performance targets or other
parameters.
Awards may accrue dividend equivalents in the amount of and at such times
as cash dividends are paid on our common stock or, in lieu of dividend
equivalents, may provide for automatic awards of stock equivalent units on each
date that cash dividends are paid on our common stock equal to (i) the product
of the dividend per share times the total number of shares subject to awards
held by the participant, divided by (ii) the fair market value of our common
stock on the dividend payment date.
Awards may be vested at the time of grant or subject to subsequent vesting
based on satisfaction of conditions set by our Board of Directors. These
conditions may include continuous service with us, achievement of specific
business objectives or specified market prices for our common stock, earnings
per share, total stockholder return, return on stockholders' equity, cash flow,
cumulative return on net assets employed, or other measurements of individual,
business unit or company performance. Our Board of Directors may set other terms
and conditions, including the manner in which awards are held, the extent to
which the holder of awards has rights of a stockholder, the circumstances under
which awards will be forfeited and whether awards may be assigned, transferred,
pledged or sold by the participant.
Awards may be settled in cash, shares of our common stock, other awards or
combinations thereof. Our Board of Directors may also require or permit
participants to defer the issuance or vesting of shares or the settlement of
awards in cash. Our Board of Directors may also provide that deferred
settlements include the payment or crediting of interest on the deferred amounts
or the payment or crediting of dividend equivalents on deferred settlements
denominated in shares. Our Board of Directors may determine the manner in which
federal, state or local tax withholding obligations will be satisfied, where
applicable, including the reduction in the amount of shares or cash to be
delivered or paid to the participant or reimbursement by the participant in cash
or with shares of common stock at the fair market value on the settlement date.
Our Board of Directors may award participants the right to receive exercise
payments when they exercise options while an active employee. The amount of the
exercise payment will be determined by our Board of Directors in its discretion,
but may not exceed 60% of the excess of the fair market value of our common
stock on the date of exercise over the exercise price. Such amount will be
reduced by any dividend payments received or credited with respect to the option
being exercised during the period that such option was outstanding. At the
discretion of our Board of Directors, the exercise payments may be made in cash,
shares of our common stock or a combination thereof. In the case of the
participant's death, any exercise payments awarded to the participant will be
paid if the options are exercised within nine months after a participant's
death, but before the expiration of the options. In the case of a participant's
retirement as described above, any exercise payments awarded to the participant
will be paid if the options are exercised within the later of (i) three months
after such retirement or (ii) three months after such options become
exercisable, but before the expiration date of such options.
The plan provides that, if a participant breaches any confidentiality or
noncompete provision to which the participant is otherwise subject, then the
participant will (i) immediately forfeit the right to exercise any option, SAR
or similar award, or to become vested in any restricted stock or similar award,
outstanding at the time of the violation and will (ii) be obligated to pay us,
as liquidated damages, an amount equal to the amount of any gains realized upon
the exercise of any option, SAR or similar award, plus any increase in value
recognized in connection with restricted stock or similar award, within the one
year period prior to the first date of the violation. Our Board of Directors
may, in its discretion, waive this provision.
Our Board of Directors has the right to cancel all outstanding awards in
the event of a change in control, in which event we will be required to pay
participants an amount equal to the difference between the exercise price (or
similar price) of the canceled awards and the fair market value of the shares
subject
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to the canceled awards. For this purpose, a change in control occurs on: (i) the
date on which any person or group becomes the beneficial owner of more than 20%
of our outstanding common stock; (ii) the date, at the end of any two-year
period, on which incumbent directors (and directors elected by incumbent
directors) cease to constitute a majority of our Board of Directors; (iii) the
date on which our stockholders approve our liquidation or dissolution; or (iv)
the date on which we consummate certain reorganizations, mergers, asset sales or
similar transactions. A change in control does not include any transaction
involving UCAR at a time when UCAR owns more than 20% of our outstanding common
stock.
FEDERAL INCOME TAX CONSEQUENCES. The federal income tax consequences of
awards granted pursuant to the plan under the Internal Revenue Code of 1986 are
summarized below.
The grant of a stock option or SAR will create no immediate tax
consequences for the participant or us. The participant will have no taxable
income upon exercising an ISO (except that an alternative minimum tax may
apply), and we will not receive a deduction when an ISO is exercised. If the
participant does not dispose of the shares acquired on exercise of an ISO within
the two year period beginning on the day after the grant of the ISO or within
one year after the transfer of the shares to the participant, the gain or loss
on a subsequent sale will be a capital gain or loss. If the participant disposes
of the shares within the two year or one year period described above, the
participant generally will realize ordinary income and we will be entitled to a
corresponding deduction. Upon exercising an SAR or stock option (other than an
ISO), the participant must recognize ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the common
stock on the exercise date, unless the shares are subject to certain
restrictions. We will receive a deduction for the same amount on the exercise
date (or the date the restrictions lapse).
With respect to other awards granted under the plan that are settled in
cash or shares of common stock that are either transferable or not subject to a
substantial risk of forfeiture, the participant must recognize ordinary income
in an amount equal to the cash or the fair market value of the shares received.
With respect to other awards granted under the plan that are settled in shares
of common stock that are subject to restrictions as to transferability and
subject to a substantial risk of forfeiture, the participant must recognize
ordinary income in an amount equal to the fair market value of the shares
received at the first time the shares become transferable or not subject to a
substantial risk of forfeiture, whichever occurs earlier. A participant may
elect, under Section 83(b) of the Internal Revenue Code, to include the excess
of the property's fair market value over any amount paid for the property in
income in the year in which the property is received. If a valid election is
made, then subsequent appreciation in the value of the property does not result
in additional compensation. We will receive a deduction for the amount
recognized as income by the participant, subject to the provisions of Section
162(m) of the Internal Revenue Code which provides for a possible denial of a
tax deduction to the Company for compensation for any named executive officer in
excess of $1 million in any year. The plan is designed so that stock option
awards thereunder should qualify for an exemption to the $1 million cap on tax
deductibility under Section 162(m).
The tax treatment upon disposition of shares acquired under the plan will
depend on how long the shares have been held. In the case of shares acquired
through exercise of an option, the tax treatment will also depend on whether or
not the shares were acquired by exercising an ISO. There will be no tax
consequences to us upon the disposition of shares acquired under the plan,
except that we may receive a deduction in the case of disposition of shares
acquired under an ISO before the applicable holding period has been satisfied.
2000 OUTSIDE DIRECTORS EQUITY INCENTIVE PLAN
Our 2000 Outside Directors Equity Incentive Plan will be adopted by our
Board of Directors and approved by our sole stockholder. The purpose of the plan
is to assist us in attracting, retaining and motivating highly qualified
directors.
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Our 2000 Outside Directors Equity Incentive Plan is substantially the same
as our 2000 Employee Equity Incentive Plan with the following exceptions: (i)
shares of common stock have been reserved for issuance under the plan;
(ii) only outside directors are eligible to participate in the plan and (iii)
the options expire on the earlier of ten years after the date of grant or four
years after an outside director ceases to be a director.
We have granted non-qualified stock options covering shares under the
plan which will become effective on the date of the prospectus. Each option has
an exercise price equal to the initial public offering price and vests on the
anniversary of the date of grant.
DEFERRAL PLAN
We participate in UCAR's compensation deferral plan for the benefit of
United States-paid management employees who participate in a variable
compensation program. The plan is effective for compensation that would
otherwise be payable on or after January 1, 2000. Under the plan, participants
are able to defer up to 85% of their variable compensation, up to 50% of their
base salary and up to 100% of their lump sum payments from UCAR's non-qualified
retirement plans. Distributions from the plan generally will be made upon
retirement or other termination of employment, unless further deferred by the
participant. In addition, a participant may irrevocably elect to receive interim
distributions prior to retirement or other termination of employment. We will be
responsible for distributions to our employees under the plan, and costs for
distributions prior to the date of this prospectus have been reflected in the
financial information included in this prospectus.
SAVINGS PLAN
We participate in UCAR's savings plan for the benefit of United States-paid
regular employees. The plan is qualified under Sections 401(a) and 401(k) of the
Internal Revenue Code. The plan consists of two types of accounts, a personal
investment account to which participants may make contributions on an after-tax
basis and a tax deferred account to which participants may contribute on a
pre-tax basis. For each eligible employee who elects to participate in the plan
and makes a contribution thereto, we make a matching contribution. The matching
contribution is 50% of the amount contributed by the employee to the extent that
the employee contributes between 1% and 7 1/2% of the employee's compensation
(including profit sharing under group plans for employees in the United States).
The maximum contribution for any participant for any year is 17 1/2% of such
participant's compensation (as similarly defined). Contributions to the plan are
invested, as the employee directs, in a fixed income fund, a balanced fund,
equity funds or funds consisting of UCAR common stock (either at fair market
value or, subject to restrictions on resale and reinvestment, at a discount of
10% from fair market value). Distributions from the plan generally are made only
upon retirement or other termination of employment, unless deferred by the
participant.
RETIREMENT PLAN
We participate in UCAR's retirement program. Prior to February 25, 1991,
substantially all of UCAR's United States-paid employees, including those
employed in our business, participated in Union Carbide's retirement program.
Effective February 25, 1991, UCAR adopted its own retirement program, which was
similar to Union Carbide's retirement program at that time. The cost related to
our participation in UCAR's retirement program will be borne entirely by us, and
costs for participants prior to the date of this prospectus have been reflected
in the financial information included in this prospectus. UCAR's retirement
program covers substantially all of our employees. Retirement and death benefits
related to employee service through February 25, 1991 are covered by Union
Carbide's retirement program. Benefits paid by Union Carbide's retirement
program are based on final average pay through February 25, 1991 plus salary
increases (not to exceed 6% per year) through January 26, 1995. All of our
employees who retired prior to February 25, 1991 are covered under Union
Carbide's retirement program. Subject to certain limitations, all service and
earnings recognized under Union Carbide's retirement program prior to February
25, 1991 are recognized under UCAR's retirement program.
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The following table sets forth the estimated annual benefits payable, based
on the indicated credited years of service and the indicated average annual
compensation used in calculating benefits, assuming a normal retirement at age
65 in 1999, under Union Carbide's retirement program and UCAR's retirement
program on a combined basis.
RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL --------------------------------------------------------
COMPENSATION 15 20 25 30 35
- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000.......................... $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500
150,000.......................... 33,750 45,000 56,520 67,500 78,750
250,000.......................... 56,250 75,000 93,750 112,500 131,250
500,000.......................... 112,500 150,000 187,500 225,000 262,500
</TABLE>
Under UCAR's retirement program, the monthly amount of an employee's
retirement benefit upon retirement at age 65 is a percentage of average monthly
compensation received during the three year period preceding retirement, or the
highest average monthly compensation received during any three calendar years in
the ten calendar years preceding retirement if it would result in a higher
pension benefit, multiplied by the number of years of service credit, less up to
50% of projected primary Social Security benefits and less any public pension
(except any military pension or any benefit under the Social Security Act). An
employee (i) who is age 62 or over with ten or more years of service credit or
(ii) whose age and service credit add up to 85 years or more may voluntarily
retire earlier than age 65 with a retirement benefit unreduced because of early
retirement, based on years of service credit at the date of retirement. The
compensation covered by UCAR's retirement program consists primarily of salary
and most types of variable compensation. The benefits payable reflected in the
preceding table are calculated on a straight life annuity basis and are subject
to an offset for such Social Security benefits.
For federal income tax purpose, the amount of benefits that can be paid
from a qualified retirement plan is restricted. UCAR has adopted nonqualified
unfunded plans for payment of those benefits at retirement that cannot be paid
from its qualified retirement plan. These nonqualified plans together with its
qualified retirement plan constitute UCAR's retirement program. Employees may
elect to receive the payment of benefits from these nonqualified unfunded plans
monthly or in a lump sum. Benefits under certain of these plans, under certain
circumstances, may be terminated if UCAR's Board of Directors determines that an
employee has engaged in activities which are detrimental to the interests of, or
are in competition with, UCAR. Except as described in the preceding sentence,
the practical effect of these non-qualified plans is to calculate benefits to
all employees, including those who are executive officers, on a uniform basis.
Benefits under these nonqualified plans are generally paid out of UCAR's
general assets, although they may also be paid through a grantor trust adopted
by it or by purchase of annuities. When UCAR purchases annuities, this does not
increase the after-tax amount of benefits to which employees are entitled, but
does relieve UCAR of liability for the benefits under the nonqualified plans
covered by such annuities.
As of February 28, 2000, the named executive officers were credited with
the number of years of service under UCAR's retirement program as follows: Mr.
Wetula, age 41, is credited with 18 years of service.
UCAR has adopted a grantor trust to assist it in providing for payment of
certain benefit plan obligations to management which are currently paid out of
its general assets. These obligations include accrued benefits under
nonqualified retirement plans and severance obligations under employment and
other agreements. The trust is also used to set aside compensation which was
deferred under UCAR's compensation deferral plan.
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The trust contains a benefits protection account which makes funds
available to the trustee to assist participants and their beneficiaries in
enforcing their claims with respect to those benefits and obligations upon a
change in control of UCAR. UCAR may from time to time contribute assets to or,
with the approval of a majority of UCAR's Board of Directors, withdraw assets
from the trust (other than from the benefits protection account, to which
$250,000 has been contributed), except that no withdrawal can be made after a
change in control until all such benefits and obligations are paid or
discharged. UCAR's Board of Directors may amend or terminate the trust at any
time prior to a change in control of UCAR. Upon a change in control of UCAR, the
trust becomes irrevocable, UCAR is required to make contributions to the trust
sufficient to discharge such obligations or pay such benefits and the trustee is
required to use the amounts held in the trust for such purposes. Upon a change
in control of UCAR, no amendment of the trust may be adopted without the written
consent of a majority of the participants and the beneficiaries who are
receiving benefits. Consistent with the requirements of applicable law, the
assets of the trust are subject to the claims of creditors of UCAR in the event
of UCAR's insolvency or bankruptcy. A change in control of UCAR is defined in a
similar manner to that of a change in control of us under our 2000 Employee
Equity Incentive Plan.
UCAR intends to segregate assets in its qualified retirement plan allocable
to our employees, effective as of January 1, 2000. In addition, we intend to
assume the obligations under UCAR's non-qualified retirement plans allocable to
our employees. In connection with these actions, we may make changes in the
benefit trust and some of the other arrangements described above.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to us regarding the
beneficial ownership of our common stock at the date of this prospectus, before
and after giving effect to this offering (assuming no exercise of the
over-allotment option) by each person known by us to own beneficially 5% or more
of our outstanding common stock, each of our directors, each of our named
executive officers, and all of our directors and executive officers as a group.
All information with respect to beneficial ownership has been furnished to us by
the respective owners.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THIS OWNED AFTER THIS
OFFERING(2) OFFERING(2)
-------------------- --------------------
NAME AND ADDRESS(1) NUMBER PERCENT NUMBER PERCENT
- ------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
UCAR International Inc.
3102 West End Avenue
Nashville, TN 37203.............................
Gilbert E. Playford
c/o UCAR International Inc.
3102 West End Avenue
Nashville, TN 37203.............................
John J. Wetula..................................
All directors and executive officers, as a
group.........................................
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of our outstanding common
stock.
(1) Unless otherwise indicated above, the address for each stockholder is c/o
GRAFTECH INC., 11709 Madison Avenue, Lakewood, Ohio 44107.
(2) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares subject to options held by that
person that are currently exercisable or exercisable within 60 days after
, 2000 are deemed outstanding. Such shares, however, are not
deemed outstanding for the purposes of computing the percentage ownership of
any other person. Except as indicated in the footnotes to this table, each
stockholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the time we founded our business, we were an unincorporated business
within the Carbon Products Division of Union Carbide Corporation. In 1989, the
Carbon Products Division was separated from Union Carbide's other businesses and
contributed to UCAR Carbon Company Inc., a wholly-owned subsidiary of Union
Carbide. UCAR Carbon was subsequently contributed to UCAR International, which
became a public company in 1995.
We remained a division of UCAR until January 2000, at which time UCAR
transferred substantially all of the assets and liabilities related to its
worldwide natural graphite business to UCAR Graph-Tech Inc., our wholly-owned
subsidiary. GRAFTECH was incorporated in April 2000 and is the holding company
for UCAR Graph-Tech Inc.
We have summarized below the material terms of the various agreements
between us and our parent company. The summary of these agreements is not
complete. You should read the full text of these agreements, which have been
filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.
INTERCOMPANY RELATIONSHIPS
As a division of UCAR, our business and all our assets and liabilities were
held by subsidiaries of UCAR International, principally UCAR Carbon and its
subsidiary, UCAR Carbon Technology Corporation. We also received various
services from UCAR, including administrative, accounting, human resource and
legal services. UCAR also provided us with the services of a number of its
executives and employees. In consideration for these services, UCAR allocated a
portion of its overhead costs to us. Our management believes that the amounts
allocated to us have been no less favorable to us than the expenses we would
have incurred to perform such services ourselves or obtain them from
unaffiliated third parties.
Effective January 1, 2000, UCAR transferred to us substantially all of its
assets related to its worldwide natural, acid-treated and flexible graphite
business, and we assumed and agreed to indemnify UCAR for all known liabilities
as of January 1, 2000 arising out of that business, and for all known and
unknown liabilities since January 1, 2000 arising out of the business, not
related to property pursuant to a transfer agreement. Additionally, we entered
into agreements for the continued provision of services, including:
- a corporate services agreement pursuant to which UCAR agreed to continue
to provide legal, accounting, tax, corporate human resources/benefits
administration, information systems, treasury/risk management and
investor relation services to us, the cost for which is calculated on the
same basis as if we were a division of UCAR,
- an employee benefits services and liabilities agreement pursuant to which
UCAR will continue to provide divisional employee benefits administration
services to us, the cost for which is calculated on the same basis as if
we were a division of UCAR, and allows our employees to continue to
participate in UCAR's corporate relocation, pension, savings, medical and
other welfare plans, at our cost,
- a technical center services agreement pursuant to which UCAR will allow
us to continue to use the UCAR Technical Center in Parma, Ohio for a
period of five years, with the option to extend our use on a year to year
basis for five additional years, at a specified rent equivalent to our
proportionate share (based on the space used by us) of the fixed costs
for the Center plus a proportionate allocation to us of variable costs
for the Center, and
- a lease agreement, which covers the portion (about one-half) of UCAR's
facility in Lakewood, Ohio that is currently used to manufacture, store
and distribute our products, that continues through December 31, 2010
with options for us to renew for five year periods through December 31,
2040 and at an annual rent for the initial term of $213,210, which is
equivalent to the appraised fair market rent therefor.
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TRANSFER AGREEMENT
The transfer agreement provides for the transfer by UCAR to us of the
business, consisting of substantially all of UCAR's assets (other than real
estate) used in the business, together with specified real property located in
Parma, Ohio. UCAR intends to transfer to us, effective as of January 1, 2000,
the funds held by UCAR's qualified retirement plan related to our employees.
UCAR will hold those funds in trust for the benefit of us and our employees, and
will continue to administer the plan.
Various agreements ancillary to the transfer agreement which detail the
transfer and various interim and ongoing relationships between UCAR and us
include:
- an intellectual property transfer agreement providing for the transfer of
all intellectual property related to the business to us,
- assumption agreements relating to UCAR's retirement program and savings
plans pursuant to which we assumed the obligations under UCAR's
retirement program and savings plan related to our employees, and
- a tax allocation agreement providing for the filing of a consolidated
income tax return and allocation and payment of income tax liabilities.
We believe that the material terms of our agreements with UCAR are no less
favorable to us than we could have obtained from unrelated third parties. Our
Board of Directors has adopted a policy that all future transactions with UCAR
will be on terms no less favorable to us than are reasonably available from
unrelated third parties and must first be approved by a majority of our
directors who do not have a material interest in the transactions.
OUR RELATIONSHIP WITH UCAR
We are currently a wholly-owned subsidiary of UCAR. After the completion of
this offering, UCAR will own about % of our common stock outstanding after
this offering, or about % if the over-allotment option is exercised in
full. Subject to 180-day lock-up agreements and applicable securities laws, UCAR
may at any time and from time to time sell any or all of the shares of our
common stock held by it publicly or privately to investors, joint venture or
strategic partners or others in one transaction or a series of transactions,
distribute any or all of such shares to its stockholders or continue to hold
such shares indefinitely.
The decision with respect to which of those actions will be taken is within
the discretion of UCAR's Board of Directors. UCAR has advised us that, in making
any such decision, UCAR's Board of Directors will take such action that it
believes to be in the best interests of UCAR and its stockholders, and that the
principal factors that it will consider in making any such decision could
include:
- the value of its shares of our common stock and the relative market
prices of our common stock and UCAR common stock,
- in the event of a distribution to stockholders, the issuance by the IRS
of a ruling that the distribution will be tax-free to UCAR stockholders
and will qualify as a reorganization for United States federal income tax
purposes,
- the absence of any court orders or regulations prohibiting or restricting
the completion of any such action,
- developments affecting our business, and
- developments affecting UCAR's business, UCAR's need for funds, and
contractual restrictions to which UCAR may be subject.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 200,000,000 shares of common
stock, par value $.01 per share, and 20,000,000 shares of preferred stock, par
value $.01 per share. At the date of this prospectus, there were shares of
our common stock outstanding, no shares of our preferred stock outstanding, and
an aggregate of shares of our common stock reserved for issuance under our
2000 Employee Equity Incentive Plan, our 2000 Outside Directors Equity Incentive
Plan and in respect of options issued by UCAR International in the event of a
distribution by UCAR International of shares of our common stock held by it to
its stockholders. In addition, our Board of Directors intends to authorize a
series of preferred stock called Series A Junior Preferred Stock. This series
consists of authorized shares, none of which shares are
outstanding and all of which have been reserved for issuance under our
stockholder rights plan.
At the date of this prospectus, there was one record holder of our common
stock who holds shares of our common stock.
COMMON STOCK
Holders of our common stock are entitled to one vote per share. Each
stockholder may vote either in person or by proxy. Stockholders are not entitled
to cumulate their votes for the election of directors.
Generally, all matters to be voted on by stockholders must be approved by a
majority or, in the case of election of directors, by a plurality of the votes
cast, at a meeting at which a quorum is present, by holders of our common stock
present in person or represented by proxy, voting together as a single class,
subject to any voting rights to which holders of our preferred stock may be
entitled.
Subject to preferences to which holders of our preferred stock issued after
this offering may be entitled, holders of our common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
our Board of Directors out of funds legally available therefor.
In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to share ratably in all of our assets which are
legally available for distribution to stockholders, subject to the prior rights
on liquidation of creditors and to preferences to which holders of our preferred
stock issued after this offering may be entitled. The holders of our common
stock do not have any preemptive, subscription, redemption or sinking fund
rights.
PREFERRED STOCK
Our Board of Directors has the authority to issue our preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions of any preferred stock or series of preferred stock, including
dividend rights, dividend rates, conversion rights, voting rights, redemption
provisions and prices (including sinking fund provisions) and liquidation
preferences, and the number of shares constituting and the designation of any
such series, without approval by our stockholders. Our Board of Directors
intends to authorize Series A Junior Preferred Stock, all of which will be
reserved for issuance under our stockholder rights plan.
CERTAIN EFFECTS OF AUTHORIZED AND UNISSUED STOCK
The unissued and unreserved shares of our capital stock may be issued for a
variety of corporate purposes, including future public or private offerings to
raise additional capital or facilitate acquisitions. Our Board of Directors
currently does not have any plans to issue additional shares of our common stock
or preferred stock (other than those reserved as described above).
One of the effects of the existence of unissued and unreserved shares may
be to enable our Board of Directors to discourage an attempt to effect a change
in control of GRAFTECH (by means of a tender offer, proxy contest or otherwise)
and thereby to protect the continuity of our management. The issuance
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<PAGE> 49
of shares of our preferred stock, whether or not related to any attempt to
effect a change in control of GRAFTECH, may adversely affect the rights of the
holders of our common stock.
STOCKHOLDER RIGHTS PLAN
Our Board of Directors intends to adopt a stockholder rights plan. Under
the plan, one preferred stock purchase right will be distributed to stockholders
of record on , 2000 as a dividend on each share of common stock
outstanding on the record date. Each share of common stock issued after the
record date will be accompanied by a right.
When a right becomes exercisable, it entitles the holder to buy one
one-thousandth of a share of Series A Senior Preferred Stock for $ . The rights
are subject to adjustment upon the occurrence of various dilutive events. The
rights will become exercisable only when a person or group becomes the
beneficial owner of 20% or more of our outstanding common stock or ten days
after a person or group announces a tender offer to acquire beneficial ownership
of 20% or more of our outstanding common stock. The rights will not become
exercisable if at that time UCAR beneficially owns more than 20% of our
outstanding common stock or, in connection with any transaction pursuant to
which any person or group acquires more than 20% of our outstanding common stock
and which has been approved by UCAR's Board of Directors. No certificates
representing the rights will be issued, and the rights are not transferable
separately from our common stock, unless the rights become exercisable.
Under various circumstances, holders of rights, except a person or group
described above and related parties, will be entitled to purchase shares of our
common stock at 50% of the per share price at which our common stock traded
prior to the acquisition or announcement. In addition, if we are acquired after
the rights become exercisable, the rights will entitle those holders to buy the
acquiring company's common shares at a similar discount.
We are entitled to redeem the rights for one cent per right prior to the
time when the rights become exercisable. If not redeemed, the rights will expire
on the tenth anniversary of the plan.
Each share of Series A Senior Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment equal to the greater of $ per
share or 1,000 times the quarterly dividend declared on our common stock, will
be entitled to a liquidation preference of $ and will have 1,000 votes,
voting together with our common stock.
CERTAIN CHARTER AND STATUTORY PROVISIONS
Certain provisions of our Certificate of Incorporation and Bylaws and of
Delaware law may discourage both an attempt to effect a change in control and
consideration of stockholder proposals. They also might limit the ultimate
liability of our directors and executive officers for breaches of certain of
their duties to us and our stockholders.
ELIMINATION OF DIRECTOR LIABILITY. Under Delaware law, directors of a
Delaware corporation can generally be held liable for certain acts and omissions
in connection with the performance of their duties to the corporation and its
stockholders. As permitted by Delaware law, however, our Certificate of
Incorporation contains a provision eliminating the liability of directors for
monetary damages for breaches of their duties to us and our stockholders. This
provision does not, however, eliminate liability for:
- breaches of duty of loyalty to us and our stockholders,
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- transactions from which improper personal benefit is derived, and
- unlawful declaration of dividends or repurchases or redemptions of shares
of capital stock.
This provision applies to officers only if they are directors and are
acting in their capacity as directors. Although the issue has not been
determined by any court, the provision has no effect on claims arising
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under federal securities laws. The provision does not eliminate the duty of
care, but does eliminates liability for monetary damages for breaches of the
duty under various circumstances. Accordingly, the provision has no effect on
the availability of equitable remedies, such as an injunction or rescission,
based upon a breach of the duty of care. Equitable remedies may not be
wholly-effective to remedy the injury caused by any such breach.
STATUTORY PROVISIONS REGARDING BUSINESS COMBINATIONS. We are subject to
Section 203 of the General Corporation Law of the State of Delaware. In general,
Section 203 prohibits an "interested stockholder" from engaging in a "business
combination" with a Delaware corporation for three years following the date such
person became an interested stockholder, unless:
- prior to the date the person became an interested stockholder, the Board
of Directors approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination,
- upon consummation of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held
by directors who are also officers of the corporation and stock held by
certain employee stock plans, or
- on or after the date of the transaction in which the person became an
interested stockholder, the business combination is approved by the Board
of Directors and authorized at a meeting of stockholders by the
affirmative vote at least two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.
Section 203 defines a "business combination" to include:
- any merger or consolidation involving the corporation or any direct or
indirect majority-owned subsidiary and an interested stockholder,
- any sale, transfer, pledge or other disposition involving an interested
stockholder of 10% or more of the assets of the corporation,
- subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to an interested stockholder,
- any transaction involving the corporation or any direct or indirect
majority-owned subsidiary which has the effect of increasing the
proportionate shares of any class or series of stock of the corporation
or any subsidiary beneficially owned by the interested stockholder, or
- the receipt by an interested stockholder of any loans, guarantees,
pledges or other financial benefits provided by or through the
corporation.
In addition, Section 203 generally defines an "interested stockholder" as
any entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or controlling
or controlled by such entity or person.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our Bylaws provide that we will
indemnify each person who is or was involved in any legal proceeding because he
is or was a director or officer (or is or was serving at our request as a
director, officer, partner, member, employee, agent or trustee of another
entity) against all expenses, liabilities and losses (including attorneys' fees,
judgments, fines, excise taxes, penalties and amounts paid in settlement)
reasonably incurred or suffered by that person in connection therewith and pay
the expenses incurred in defending the proceeding in advance of its final
disposition, in each case to the fullest extent authorized by Delaware law (as
currently in effect or, if applicable, as amended).
We intend to obtain a policy providing up to $ million of insurance to
our directors, officers and certain employees against various losses and
expenses, including claims arising in connection with this offering.
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<PAGE> 51
OTHER PROVISIONS. The following provisions shall only become effective if
UCAR ceases to own more than 20% of our outstanding common stock.
Our Certificate of Incorporation and Bylaws provide that, except as
otherwise required by Delaware law, directors (other than those elected by the
holders of our preferred stock issued after this offering) can be removed only
for cause and only by the affirmative vote of holders of at least 67% of the
voting power of all then outstanding shares of capital stock. Any vacancy on our
Board of Directors, including a vacancy created by an increase in the authorized
number of directors, may be filled only by a majority vote of the directors then
in office (and not by the stockholders unless no directors are then in office).
In addition, our Certificate of Incorporation and Bylaws provide that
stockholders are not permitted to call a special meeting of stockholders or to
require such a special meeting to be called, that only a majority of the entire
Board of Directors, certain committees of the Board of Directors, certain
directors or the president or chief executive officer will be able to call such
a special meeting and that stockholder action may be taken only at an annual or
a special meeting of stockholders and may not be taken by written consent. These
provisions, taken together, prevent stockholders from forcing consideration by
the stockholders of stockholder proposals over the opposition of our Board of
Directors, except at an annual meeting.
Our Bylaws provide that notice of nominations for the election of directors
to be made at, and business to be brought before, an annual or a special meeting
of stockholders by a stockholder must be received by the secretary not later
than 120 days before the meeting (except that, if notice or public disclosure of
the meeting is given or made fewer than 120 days before the meeting, the notice
need only be received within 10 days following the notice or public disclosure).
A notice regarding any nomination must contain detailed information regarding
the stockholder making the nomination and each nominee. A notice regarding any
business to be brought before the meeting must contain detailed information
regarding the business to be so brought, the reasons for conducting such
business at the meeting, the stockholder proposing such business and any
material interest of such stockholder in such business. Although these
provisions do not give our Board of Directors any power to approve or disapprove
stockholder nominations or proposals, they have the effect of precluding a
contest for the election of directors or the consideration of stockholder
proposals if the procedures established by the Bylaws are not complied with and
may have the effect of discouraging a stockholder from conducting such a
contest.
Our Certificate of Incorporation authorizes our Board of Directors, in
connection with taking any action, to consider factors other than the economic
benefit of such action to our stockholders. Some of these factors include the
long-term and short-term interest of our employees, suppliers, creditors and
customers and of the communities in which we engages in business.
Our Certificate of Incorporation provides that the affirmative vote of the
holders of 67% of the voting stock will be required to amend, modify or repeal
any provision of our Bylaws or the provisions of our Certificate of
Incorporation discussed above. Our Certificate of Incorporation provides that
our Board of Directors, pursuant to a resolution adopted by the affirmative vote
of a majority of our entire Board of Directors, will be able to amend, modify or
repeal the Bylaws.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ,
.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have an aggregate of
outstanding shares of our common stock. Of these shares, all of
the shares sold in this offering (including any shares sold upon exercise of the
over-allotment option) will be freely tradeable without restriction or further
registration under the Securities Act, except that shares purchased by our
"affiliates," as that term is defined in Rule 144 under the Securities Act, may
generally only be sold in compliance with the limitations of Rule 144 described
below.
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<PAGE> 52
Upon completion of this offering, we will have reserved an aggregate of
outstanding shares of our common stock under our 2000 Employee Equity
Incentive Plan and our 2000 Outside Directors Equity Incentive Plan and
shares reserved for issuance in respect of options issued by UCAR
International in the event of a distribution by UCAR International of shares of
our common stock held by it to its stockholders. After this offering, we intend
to register under the Securities Act sales and resales of the shares reserved
under the plans. We also intend to enter into a stockholders agreement with UCAR
which will give it the right to require us to register under the Securities Act
sales and resales of the outstanding shares of our common stock held by it and
the shares reserved in respect of options issued by it. To the extent that such
shares are registered, they will be freely tradeable (upon issuance, in the case
of the reserved shares) without restriction or further registration under the
Securities Act. To the extent that such shares are not registered, they are
(upon issuance will be, in the case of the reserved shares) deemed "restricted
securities" under Rule 144. Restricted securities may be sold in the public
markets in accordance with the provisions of Rule 144.
All outstanding and reserved shares of our common stock, except for the
shares sold in this offering, will be subject to the 180-day lock-up agreements
described below.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the registration statement of which this prospectus is a
part, a person, including any of our "affiliates," who has beneficially owned
his or her restricted securities for at least one year from the later of the
date such securities were acquired from us or, if applicable, one of our
affiliates, is entitled to sell, within any three month period, a number of
shares that does not exceed the greater of:
- 1% of the then outstanding shares of our common stock, which will equal
about shares after this offering, or
- the average weekly trading volume of our common stock on The Nasdaq
National Market during the four calendar weeks preceding the sale.
Sales under Rule 144 are also subject to certain requirements concerning
the availability of public information, manner of sale and notice. In addition,
under Rule 144(k), if a period of at least two years has elapsed between the
later of the restricted securities were acquired from us or, if applicable, one
of our affiliates, a stockholder who is not one of our affiliates at the time of
sale and has not been one of our affiliates for a period of three months prior
to the sale is entitled to sell the shares immediately without compliance with
the foregoing requirements of Rule 144.
180-DAY LOCK UP AGREEMENTS
We have agreed that we will not sell any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common stock, or permit the exercise of any employee stock options, without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus. The selling stockholder has agreed
that it will not sell or distribute to its stockholders any shares of our common
stock or securities convertible into or exchangeable or exercisable for any
shares of our common stock, or enter into a transaction which would have the
same effect or economic consequences, without the prior written consent of
Credit Suisse First Boston Corporation for a period of 180 days after the date
of this prospectus, subject to certain exceptions.
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<PAGE> 53
MATERIAL UNITED STATES TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS
GENERAL
The following is a general discussion of certain U.S. federal income and
estate tax considerations with respect to the ownership and disposition of the
shares applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder" is any
holder other than:
- a citizen or resident of the United States,
- a corporation (or other entity taxable as a corporation) created or
organized in the United States or under the laws of the United States or
of any state,
- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source, and
- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.
If a partnership holds shares, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding shares, we suggest
that you consult your tax advisor.
This discussion is based on current provisions of the Internal Revenue Code
of 1986, existing and proposed Treasury Regulations promulgated thereunder,
judicial opinions, and published positions of the Internal Revenue Service, and
all other applicable authorities, all of which are subject to change, possibly
with retroactive effect. This discussion does not address all aspects of U.S.
federal income and estate taxation or any aspects of state, local or non-U.S.
taxes, nor does it consider any specific facts or circumstances that may apply
to a particular Non-U.S. Holder that may be subject to special treatment under
the U.S. federal income tax laws (such as insurance companies, tax-exempt
organizations, financial institutions, brokers, dealers in securities, and
certain U.S. expatriates). Accordingly, prospective investors are urged to
consult their tax advisors regarding the U.S. federal, state, local and non-U.S.
income and other tax considerations of acquiring, holding and disposing of the
shares.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of the shares generally will be subject
to withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty. Under current Treasury Regulations, dividends paid before
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of the country of address, unless the payor has knowledge to the
contrary, for purposes of withholding and of determining the applicability of a
tax treaty rate. However, Treasury Regulations applicable to dividends paid
after December 31, 2000 eliminate this presumption, subject to certain
transition rules.
For dividends paid after December 31, 2000, unless Non-U.S. Holders comply
with certain IRS certification or documentary evidence procedures, they
generally will be subject to U.S. backup withholding tax at a 31% rate under the
backup withholding rules described below, rather than at the 30% or reduced tax
treaty rate. The certification requirement may be fulfilled by providing IRS
Form W-8BEN or W-8ECI to the payor. Non-U.S. Holders should consult their own
tax advisors concerning the effect, if any, of the rules affecting post-December
31, 2000 dividends on their possible investment in the shares.
The withholding tax does not apply to dividends paid to a Non-U.S. Holder
that provides a Form W-8ECI, certifying that the dividends are effectively
connected with the Non-U.S. Holder's conduct of a trade or business within the
United States. Instead, the effectively connected dividends will generally be
subject to regular U.S. federal income tax as if the Non-U.S. Holder were a U.S.
resident. If the Non-U.S. Holder is eligible for the benefits of a tax treaty
between the United States and the holder's country
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<PAGE> 54
of residence, any effectively connected income will be subject to U.S. federal
income tax only if it is attributable to a permanent establishment in the United
States maintained by the holder. A Non-U.S. holder that is a corporation may
also be subject to an additional "branch profits tax" equal to 30% (or a lower
treaty rate) of its effectively connected earnings and profits for the taxable
year, subject to certain adjustments.
A Non-U.S. Holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund along with the required information with
the IRS in a timely manner.
GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain realized upon the sale or other disposition of the shares
unless:
- the gain is effectively connected with a trade or business carried on by
the Non-U.S. Holder within the United States and, if a tax treaty
applies, is attributable to a U.S. permanent establishment of the
Non-U.S. Holder (in which case the branch profits tax discussed above may
also apply if the Non-U.S. Holder is a corporation),
- the Non-U.S. Holder is an individual who holds the shares as a capital
asset and is present in the United States for 183 days or more in the
taxable year of disposition and certain other tests are met,
- the Non-U.S. Holder is subject to tax under the provisions of the
Internal Revenue Code regarding the taxation of certain U.S. expatriates,
or
- we are or have been a U.S. real property holding corporation ("USRPHC"),
for U.S. federal income tax purposes (which we do not believe that we
currently are or will become), at any time within the shorter of the
five-year period preceding such disposition and such Non-U.S. Holder's
holding period. If we are or were to become a USRPHC at any time during
this period, gains realized upon a disposition of the shares by a
Non-U.S. Holder that did not directly or indirectly own more than 5% of
our common stock outstanding during this period would not be subject to
U.S. federal income tax, provided that our common stock is "regularly
traded on an established securities market" (within the meaning of
Section 897(c)(3) of the Internal Revenue Code).
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
We must report annually to the IRS the amount of dividends paid, the name
and address of the recipient, and the amount of any tax withheld. A similar
report is sent to the Non-U.S. Holder. Under tax treaties or other agreements,
the IRS may make its reports available to tax authorities in the recipient's
country of residence. Dividends paid on or before December 31, 2000 to an
address outside the United States are not subject to backup withholding, unless
the payor has knowledge that the payee is a U.S. person. However, a Non-U.S.
Holder will be required to certify its non-U.S. status in order to avoid backup
withholding at a 31% rate on dividends paid after December 31, 2000 or dividends
paid on or before that date to an address within the United States.
U.S. federal information reporting and backup withholding generally will
not apply to a payment of proceeds of a disposition of the shares where the
transaction is effected outside the United State through a non-U.S. office of a
non-U.S. broker. However, information reporting requirements, but not backup
withholding, generally will apply to such a payment if the broker is:
- a U.S. person,
- a "controlled foreign corporation" for U.S. federal income tax purposes,
- a foreign person 50% or more of whose gross income from certain periods
is effectively connected with a U.S. trade or business, or
- a foreign partnership with certain U.S. connections (for payments made
after December 31, 2000).
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<PAGE> 55
Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the holder is a Non-U.S.
Holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption (and the broker has no actual knowledge to the
contrary).
A Non-U.S. Holder will be required to certify its non-U.S. tax status in
order to avoid information reporting and backup withholding at a 31% rate on
disposition proceeds where the transaction is effected by or through a U.S.
office of a broker.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder can be refunded or
credited against the Non-U.S. Holder's U.S. federal income tax liability, if
any, provided that the required information is furnished to the IRS in a timely
manner.
ESTATE TAX
Shares owned or treated as owned by an individual who is not a citizen or
resident (as defined for U.S. federal estate tax purposes) of the United States
at the time of death will be includible in the individual's gross estate for
U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise, and therefore may be subject to U.S. federal estate tax.
THE FOREGOING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE NON-U.S. HOLDER OF THE SHARES SHOULD CONSULT ITS
OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE SHARES.
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<PAGE> 56
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we and the selling stockholder have
agreed to sell to the underwriters named below, for whom Credit Suisse First
Boston Corporation, Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as
representatives, the following respective numbers of shares of our common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Bear, Stearns & Co. Inc.....................................
J.P. Morgan Securities Inc..................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
---------
Total.............................................
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
The selling stockholder has granted to the underwriters a 30-day option to
purchase on a pro rata basis up to additional shares from the selling
stockholder at the initial public offering price less the underwriting discounts
and commissions. The option may be exercised only to cover any over-allotments
of common stock.
The underwriters propose to offer the shares initially at the public
offering price on the cover page of this prospectus and to selling group members
at that price less a concession of $ per share. The underwriters and
selling group members may allow a discount of $ per share on sales to
other broker/dealers. After the initial public offering, the public offering
price and concession and discount to broker/dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
and the selling stockholder will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
---------------------- ----------------------
WITHOUT WITH WITHOUT WITH
OVER- OVER- OVER- OVER-
ALLOTMENT ALLOTMENT ALLOTMENT ALLOTMENT
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us........................ $ $ $ $
Expenses payable by us..........................
Underwriting discounts and commissions paid by
selling stockholder...........................
Expenses payable by the
selling stockholder...........................
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the SEC a
registration statement under the Securities Act relating to, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing,
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<PAGE> 57
nor will we permit the exercise of any employee stock options, without the prior
written consent of Credit Suisse First Boston Corporation, for a period of 180
days after the date of this prospectus.
The selling stockholder has agreed that it will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any shares of
our common stock or securities convertible into or exchangeable or exercisable
for any shares of our common stock, enter into a transaction which would have
the same effect, or enter into any swap, hedge or other arrangement that
transfers, in whole or in part, any of the economic consequences of ownership of
our common stock, whether any such aforementioned transaction is to be settled
by delivery of our common stock or such other securities, in cash or otherwise,
or publicly disclose the intention to make any such offer, sale, pledge or
disposition, or to enter into any such transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of Credit Suisse
First Boston Corporation, for a period of 180 days after the date of this
prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors
and certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
We and the selling stockholder have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives, and may not reflect the market price for our
common stock that may prevail following this offering. We will consider, among
others, the following principal factors in determining the initial public
offering price:
- the information in this prospectus and otherwise available to the
representatives,
- market conditions for initial public offerings,
- the history of and prospects for the industry in which we compete,
- our past and present operations,
- our past and present earnings and current financial position,
- the ability of our management,
- our prospects for future earnings,
- the present state of our development,
- the recent prices of, and the demand for, publicly traded common stock of
generally comparable companies, and
- the general condition of the securities markets at the time of this
offering.
We can offer no assurance that the initial public offering price will
correspond to the price at which our common stock will trade in the public
market subsequent to this offering or that an active trading market for our
common stock will develop and continue after this offering.
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<PAGE> 58
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations.
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<PAGE> 59
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholder prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of the common stock in Canada must be made in accordance
with applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of the common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholder and the
dealer from whom such purchase confirmation is received that (i) such purchaser
is entitled under applicable provincial securities laws to purchase such common
stock without the benefit of a prospectus qualified under such securities laws,
(ii) where required by law, that such purchaser is purchasing as principal and
not as agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the selling stockholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the common stock to whom the Securities Act (British
Columbia) applies is advised that the purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any common stock acquired by the purchaser pursuant to this offering. The report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE> 60
LEGAL MATTERS
Legal matters with regard to our common stock will be passed upon for us by
Kelley Drye & Warren LLP, New York, New York and Stamford, Connecticut. The
underwriters have been represented by Cravath, Swaine & Moore, New York, New
York.
EXPERTS
The financial statements of UCAR Graph-Tech Inc. as of December 31, 1998
and 1999 and for each of the years in the three year period ended December 31,
1999 have been included herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 with
respect to the shares of our common stock offered hereby. This prospectus, which
is a part of the registration statement, does not contain all of the information
included in the registration statement and the exhibits and schedules thereto.
You may review a copy of the registration statement, including the exhibits and
schedules thereto, at the SEC's public reference room at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 or Seven World Trade Center, 13th
Floor, New York, New York 10048 or Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference rooms.
We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
SEC.
The registration statement, including the exhibits and schedules thereto,
and our future filings with the SEC, can also be reviewed by accessing the SEC's
Internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
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UCAR GRAPH-TECH INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets at December 31, 1998 and 1999................ F-3
Statements of Operations for Each of the Years in the
Three-Year Period Ended December 31, 1999................. F-4
Statements of Stockholder's Equity for Each of the Years in
the Three-Year Period Ended December 31, 1999............. F-5
Statements of Cash Flows for Each of the Years in the
Three-Year Period Ended December 31, 1999................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 62
The transfer of shares of UCAR Graph-Tech Inc. from UCAR to GRAFTECH INC.
as described in Note 11 has not been completed as of April 17, 2000. When the
transfer of shares has been completed, we will be in a position to issue the
following report:
INDEPENDENT AUDITORS' REPORT
The Board of Directors
UCAR Graph-Tech Inc.:
We have audited the balance sheets of UCAR Graph-Tech Inc., a wholly-owned
subsidiary of GRAFTECH INC., as of December 31, 1998 and 1999 and the related
statements of operations, stockholder's equity and cash flows for each of the
years in the three-year period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of UCAR Graph-Tech Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
Cleveland, Ohio
March 24, 2000, except as to
note 11, which is as of
April 14, 2000
F-2
<PAGE> 63
UCAR GRAPH-TECH INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 152 $ 18
Accounts receivable, net of allowance of $130 in 1999..... 4,944 4,891
Other receivables......................................... 189 244
Inventories:
Raw materials and supplies............................. 532 549
Work in process........................................ 1,057 881
Finished goods......................................... 1,385 1,302
------- -------
Total inventories................................. 2,974 2,732
------- -------
Prepaid expenses and other current assets................. 164 317
------- -------
Total current assets.............................. 8,423 8,202
------- -------
Fixed assets................................................ 23,956 25,608
Less: accumulated depreciation.............................. (9,180) (9,639)
------- -------
Net fixed assets.................................. 14,776 15,969
------- -------
Total assets...................................... $23,199 $24,171
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable.................................... $ 1,287 $ 1,584
Accrued compensation and related costs.................... 1,181 1,274
Taxes payable............................................. 4,689 2,621
Other accrued liabilities................................. 87 176
------- -------
Total current liabilities......................... 7,244 5,655
Postretirement benefits, other than pensions................ 2,597 2,774
Pension and related benefits................................ 1,246 1,322
Deferred taxes, net......................................... 1,706 1,752
------- -------
Total liabilities................................. 12,793 11,503
------- -------
Stockholder's equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock, $.01 par value; 200,000,000 shares
authorized, 100 shares issued and outstanding at
December 31, 1998 and 1999............................. -- --
Divisional equity......................................... 10,406 12,668
------- -------
Total stockholder's equity........................ 10,406 12,668
------- -------
Commitments, contingencies and subsequent event
Total liabilities and stockholder's equity........ $23,199 $24,171
======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE> 64
UCAR GRAPH-TECH INC.
STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net sales................................................... $37,680 $37,589 $33,782
Cost of sales............................................... 22,100 21,931 21,437
------- ------- -------
Gross profit...................................... 15,580 15,658 12,345
------- ------- -------
Research and development.................................... 1,012 1,326 1,534
Selling, administrative and other expenses.................. 3,720 3,462 4,680
Other (income) expense, net................................. 216 (100) 32
------- ------- -------
4,948 4,688 6,246
------- ------- -------
Operating profit.................................. 10,632 10,970 6,099
Provision for income taxes.................................. 4,374 4,511 2,516
------- ------- -------
Net income........................................ $ 6,258 $ 6,459 $ 3,583
======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE> 65
UCAR GRAPH-TECH INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON DIVISIONAL STOCKHOLDER'S
STOCK EQUITY EQUITY
------ ---------- -------------
<S> <C> <C> <C>
Balance at December 31, 1996................................ $ -- $13,494 $13,494
Net income.................................................. -- 6,258 6,258
Other changes............................................... -- (8,309) (8,309)
------ ------- -------
Balance at December 31, 1997................................ -- 11,443 11,443
Net income.................................................. -- 6,459 6,459
Other changes............................................... -- (7,496) (7,496)
------ ------- -------
Balance at December 31, 1998................................ -- 10,406 10,406
Net income.................................................. -- 3,583 3,583
Other changes............................................... -- (1,321) (1,321)
------ ------- -------
Balance at December 31, 1999................................ $ -- $12,668 $12,668
====== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE> 66
UCAR GRAPH-TECH INC.
STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income................................................ $ 6,258 $ 6,459 $ 3,583
Non-cash (credits) charges to net income:
Depreciation and amortization.......................... 999 1,101 1,133
Provision for doubtful accounts........................ -- -- 130
Loss on disposal of fixed assets....................... 178 2 --
Pension and postretirement benefit costs............... 695 741 776
Deferred taxes......................................... 281 (178) (105)
Increase (decrease) in cash due to changes in:
Accounts receivable.................................... 242 208 (77)
Other receivables...................................... 37 (45) (55)
Inventories............................................ (249) 702 242
Prepaid expenses....................................... (4) 11 (2)
Trade accounts payables................................ 1,202 (518) 297
Accrued compensation and related costs................. 600 (371) 93
Taxes payable.......................................... 512 596 (2,068)
Other accrued liabilities.............................. (22) (11) 89
Postretirement and pension and other long-term
obligations.......................................... (876) (118) (523)
------- ------- -------
Net cash provided by operating activities......... 9,862 8,579 3,513
------- ------- -------
Cash used in investing activities -- capital expenditures... (1,825) (1,005) (2,326)
------- ------- -------
Cash used in financing activities -- other changes in
divisional equity......................................... (8,037) (7,422) (1,321)
------- ------- -------
Net increase (decrease) in cash................... -- 152 (134)
Cash at beginning of year................................... -- -- 152
------- ------- -------
Cash at end of year......................................... $ -- $ 152 $ 18
======= ======= =======
Supplemental disclosure of non-cash financing
activities -- fixed assets transferred to UCAR............ $ 272 $ 74 $ --
======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE> 67
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) DISCUSSION OF BUSINESS AND STRUCTURE
UCAR Graph-Tech Inc. (Company or UCAR Graph-Tech), a wholly-owned
subsidiary of GRAFTECH INC. (GRAFTECH) (see note 11), is the world leader in the
development and manufacture of high quality, natural graphite-based products.
The Company was incorporated in August 1999. The Company's business remained a
division of UCAR International Inc. (UCAR International and, together with its
subsidiaries, UCAR) until January 2000, at which time substantially all assets
used in the business of the division (other than certain real property, which is
leased to the Company under a long-term lease), and all liabilities arising out
of the business, were contributed to UCAR Graph-Tech.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) INVENTORIES
Inventories are stated at cost or market, whichever is lower. Cost is
determined using the "average cost" method.
(b) FIXED ASSETS AND DEPRECIATION
Fixed assets are carried at cost. Expenditures for replacements are
capitalized and the replaced items are retired. Except as otherwise disclosed,
gains and losses from the sale of fixed assets are included in other (income)
expense, net.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets, which are 20 years for land improvements and range
from 25 to 40 years for building improvements and 3 to 10 years for machinery,
equipment and other.
The carrying value of fixed assets is assessed when factors indicating
impairment are present. The Company determines such impairment by measuring
undiscounted future cash flows. If impairment is present, the assets are
reported at fair value.
(c) RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
(d) INCOME TAXES
The Company is included in the consolidated federal income tax returns of
UCAR. For purposes of preparing the financial statements, the separate return
method has been used for allocating federal income taxes.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and for operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rate is recognized in income in the period that includes the
enactment date.
F-7
<PAGE> 68
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) STOCK BASED COMPENSATION PLANS
UCAR accounts for stock-based compensation plans using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). As such, compensation expense is recorded
on the date of grant only if the market price of the underlying stock exceeded
the exercise price or if ultimate vesting is subject to performance conditions.
The total amount of recorded compensation expense, if any, is based on the
number of awards that eventually vest. No compensation expense is recognized for
forfeited awards, failure to satisfy a service requirement or failure to satisfy
a performance condition. UCAR's accruals of compensation expense for awards
subject to performance conditions are based on an assessment of the probability
of satisfying the performance conditions. Compensation expense with respect to
UCAR options issued to Company employees has been included in the accompanying
financial statements.
(f) RETIREMENT PLAN
The Company participates in UCAR's retirement plans. The cost of pension
benefits under the plans is determined by an independent actuarial firm using
the "projected unit credit" actuarial cost method. Contributions to the
retirement plan are made in accordance with the requirements of the Employee
Retirement Income Security Act of 1974.
(g) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The estimated cost of future medical and life insurance benefits is
determined by an independent actuarial firm using the "projected unit credit"
actuarial cost method. Such costs are recognized as employees render the service
necessary to earn the postretirement benefits. Benefits have been accrued, but
not funded.
(h) POSTEMPLOYMENT BENEFITS
The Company accrues postemployment benefits expected to be paid,
principally severance, over employees' active service periods.
(i) COMPREHENSIVE INCOME
The Company had no items of other comprehensive income during the three
years ended December 31, 1999. Thus, comprehensive income equals net income for
all periods.
(j) USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare the financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
F-8
<PAGE> 69
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) SEGMENT REPORTING
The following tables summarize information as to the Company's operations
in different geographic areas:
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net sales(a):
United States....................................... $29,926 $30,141 $27,595
Other countries..................................... 7,754 7,448 6,187
------- ------- -------
Total....................................... $37,680 $37,589 $33,782
======= ======= =======
</TABLE>
- ---------------
(a) Net sales are based on location of buyer.
One customer accounted for 36%, 33% and 33% of net sales for 1997, 1998 and
1999, respectively. Such percentages include companies acquired by the customer
for all periods indicated.
(4) INCOME TAXES
Income tax expense attributable to income from operations consists of:
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
U.S. federal income taxes:
Current............................................ $3,496 $4,005 $2,240
Deferred........................................... 240 (153) (90)
------ ------ ------
3,736 3,852 2,150
------ ------ ------
State income taxes:
Current............................................ 597 684 381
Deferred........................................... 41 (25) (15)
------ ------ ------
638 659 366
------ ------ ------
$4,374 $4,511 $2,516
====== ====== ======
</TABLE>
Income tax expense attributable to income from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 35% to pretax
income from operations as a result of the following:
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------ ----- -----
<S> <C> <C> <C>
Statutory U.S. federal tax rate........................ 35% 35% 35%
State (Ohio) tax rate.................................. 6 6 6
------ ----- -----
Total tax rate............................... 41% 41% 41%
====== ===== =====
</TABLE>
F-9
<PAGE> 70
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1999 were as follows:
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
------------------
1998 1999
------ ------
<S> <C> <C>
Deferred tax assets:
Postretirement and other employee benefits............. $1,772 $1,984
Other.................................................. -- 54
------ ------
Total deferred tax assets.............................. 1,772 2,038
Deferred tax liabilities -- furniture, fixtures and
equipment.............................................. 3,326 3,487
------ ------
Net deferred tax liability............................. $1,554 $1,449
====== ======
</TABLE>
Deferred income tax assets and liabilities are classified on a net current
and noncurrent basis. Net current deferred income tax assets are included in
prepaid expenses and other current assets in the amounts of $152 and $303 at
December 31, 1998 and 1999, respectively.
(5) RELATED PARTY
The Company is a wholly owned subsidiary of UCAR. As a wholly owned
subsidiary of UCAR, the Company has received various services provided by UCAR,
including, among others, administration, accounting, human resources and legal.
UCAR has also provided the Company with the services of a number of its
executives and employees. In consideration for these services, UCAR has
historically allocated a portion of its overhead costs related to such services
to the Company. The Company's management believes that the amounts allocated
have been no less favorable to the Company than the expenses would have been to
obtain such services from unaffiliated third parties. With the exception of the
agreements set forth below, none of these services have been provided to the
Company pursuant to any written agreement between it and UCAR.
(a) TRANSFER AGREEMENT
Pursuant to a transfer agreement, effective January 1, 2000, UCAR
transferred substantially all of the assets (other than real estate) of its
worldwide natural, acid treated and flexible graphite business to the Company
and the Company assumed and agreed to indemnify UCAR for all known liabilities
as of January 1, 2000 arising out of the business, and for all known and unknown
liabilities since January 1, 2000 arising out of the business not related to
property. Pursuant to amendments to the transfer agreement, UCAR made an
additional contribution of real property located in Parma, Ohio to the Company
and transferred to the Company the funds held in UCAR's qualified retirement
plan related to Company employees.
(b) INTELLECTUAL PROPERTY TRANSFER AGREEMENT
Pursuant to an intellectual property transfer agreement, UCAR transferred
of all intellectual property related to the business to the Company. In
furtherance of the intellectual property transfer agreement, the Company entered
into an:
- assignment of improvements,
- an assignment of technology,
- an assignment and assumption of technology contracts,
- an assignment of U.S. patents,
- an assignment of U.S. patent applications,
F-10
<PAGE> 71
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- an assignment of jointly owned patent applications,
- an assignment of Canadian patents,
- an assignment of Canadian patent applications,
- an assignment of foreign patent and patent applications,
- a United States trademark assignment, and
- a foreign trademark assignment
(c) CORPORATE SERVICES AGREEMENT
The Company entered into a corporate services agreement with UCAR pursuant
to which UCAR agreed to continue to provide legal, accounting, tax, corporate
human resources/benefits administration, information systems, treasury/risk
management and investor relation services to the Company. The fees for such
services are calculated as if the Company were a division of UCAR and currently
are $830 per year. Costs previously allocated to the Company with respect to
such services have been determined on the same basis as the agreement and are
included in selling, administrative and other expenses in the Statement of
Operations. They were $780, $804 and $828 in 1997, 1998 and 1999, respectively.
(d) EMPLOYEE BENEFITS SERVICES AND LIABILITIES AGREEMENT
The Company entered into an employee benefits services and liabilities
agreement pursuant to which UCAR agreed to continue to maintain certain employee
benefits functions on behalf of the Company. Pursuant to the agreement, UCAR
provides welfare benefit plans for Company employees, including corporate
relocation, pension, savings and medical plans. The Company will generally be
charged for these services based on either the Company's total payroll, number
of employees or actual cost. Costs previously allocated to the Company with
respect to such services have been determined on the same basis as the agreement
and are included in cost of sales and selling, administrative and other expenses
in the Statement of Operations. They were $2,254, $2,455 and $2,692 in 1997,
1998 and 1999, respectively.
The Company entered into agreements relating to UCAR's retirement and
savings plans pursuant to which it assumed the obligations of UCAR under UCAR's
retirement and savings plans related to Company employees as of December 31,
1997 (see Note 8).
(e) TECHNICAL CENTER SERVICES AGREEMENT
The Company entered into a technical center services agreement with UCAR
pursuant to which UCAR agreed to provide certain services to the Company to
facilitate the transfer of the operations of the business at UCAR's technical
center in Parma, Ohio. The Company agreed to pay rent and fees for the continued
use of the technical center for a period of five years and will be charged based
on actual usage of such facilities and related personnel. Costs previously
allocated to the Company with respect to such services have been determined on
the same basis as the agreement and are included in research and development in
the Statement of Operations.
(f) TAX ALLOCATION AGREEMENT
The Company entered into a tax allocation agreement with UCAR which
provides for the filing of a consolidated tax returns on behalf of the Company.
The Company reimburses UCAR as requested for any interim payments made on its
behalf, with final settlement being made at the end of the year.
F-11
<PAGE> 72
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(g) FUTURE AGREEMENTS
The Company's board of directors has adopted a policy that any future
transactions with UCAR will be on terms no less favorable to the Company than
are reasonably available from unrelated third parties and must first be approved
by a majority of the Company's directors who do not have a material interest in
the transactions.
(6) FIXED ASSETS
Fixed assets consisted of the following at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Fixed assets:
Land improvements...................................... $ 781 $ 787
Building improvements.................................. 776 776
Machinery, equipment and other......................... 21,554 21,586
Construction in progress............................... 845 2,459
------- -------
$23,956 $25,608
======= =======
</TABLE>
(7) LEASES
Lease commitments under noncancelable operating leases extending for one
year or more will require the following future payments:
<TABLE>
<S> <C>
2000........................................................ $ 307
2001........................................................ 292
2002........................................................ 247
2003........................................................ 214
2004........................................................ 213
After 2004.................................................. 1,066
</TABLE>
Total lease and rental expenses under noncancelable operating leases
extending one month or more were $112, $131 and $115 in 1997, 1998 and 1999,
respectively.
Effective January 1, 2000, the Company entered into a ten-year operating
lease agreement, with five five-year extensions, with UCAR related to the
principal building in which the Company operates. Payments under the lease are
$213 per year. Prior to entering into the agreement, the Company has been
allocated depreciation expense with respect to the use of the building in the
amount of $8, $13 and $14 for 1997, 1998 and 1999, respectively.
(8) BENEFIT PLANS
(a) RETIREMENT PLANS AND POSTRETIREMENT BENEFIT PLANS
Until February 25, 1991, the Company participated in the U.S. retirement
plan of Union Carbide Corporation (Union Carbide). Effective February 26, 1991,
the Company began participating in the UCAR retirement plan. Retirement and
death benefits related to employee service through February 25, 1991 are covered
by the Union Carbide plan. Benefits paid by the Union Carbide plan are based on
final average pay through February 25, 1991, plus salary increases (not to
exceed 6% per year) until January 26, 1995 when Union Carbide ceased to own at
least 50% of the equity of UCAR. Pension benefits under the UCAR plan are based
primarily on years of service and compensation levels prior to
F-12
<PAGE> 73
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
retirement. Net pension costs for the Company were $478, $514 and $534 in 1997,
1998 and 1999, respectively.
The Company also provides health care and life insurance benefits for
eligible retired employees. These benefits are provided through various
insurance companies and health care providers. The Company accrues the estimated
net postretirement benefit costs during the employees' credited service between
ages 45 and 55.
The components of the Company's net pension costs are as follows:
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Service cost............................................... $ 458 $ 528 $ 564
Interest cost.............................................. 420 460 514
Expected return on assets.................................. (401) (475) (545)
Amortization............................................... 1 1 1
----- ----- -----
Net pension cost......................................... $ 478 $ 514 $ 534
===== ===== =====
</TABLE>
The components of the Company's net postretirement benefit costs are as
follows:
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
----------------------
1997 1998 1999
----- ----- ----
<S> <C> <C> <C>
Service cost................................................ $ 173 $ 205 $169
Interest cost............................................... 166 144 156
Amortization of prior service cost.......................... (122) (122) (83)
----- ----- ----
Net postretirement benefit cost........................... $ 217 $ 227 $242
===== ===== ====
</TABLE>
F-13
<PAGE> 74
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of beginning and ending balances of benefit obligations
under, and fair value of assets of, all pension and postretirement benefit
obligations of the Company, and the funded status of the obligations, are as
follows:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
------------------ ------------------------
1998 1999 1998 1999
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Changes in benefit obligation:
Net benefit obligation at beginning of
year................................... $ 6,605 $ 7,652 $ 2,090 $ 2,252
Service cost.............................. 528 564 205 169
Interest cost............................. 460 514 144 156
Plan amendments........................... -- -- -- (169)
Actuarial (gain) loss..................... 93 (1,113) (126) (1)
Gross benefits paid....................... (34) (50) (61) (65)
------- ------- ------- -------
Net benefit obligation at end of
year................................. $ 7,652 $ 7,567 $ 2,252 $ 2,342
======= ======= ======= =======
Changes in plan assets:
Fair value of plan assets at beginning of
year................................... $ 5,974 $ 6,935 $ -- $ --
Actual return on plan assets.............. 938 932 -- --
Employer contributions.................... 57 457 -- --
Gross benefits paid....................... (34) (50) -- --
------- ------- ------- -------
Fair value of plan assets at end of
year................................. $ 6,935 $ 8,274 $ -- $ --
======= ======= ======= =======
Reconciliation of funded status:
Funded status at end of year.............. $ (717) $ 707 $(2,252) $(2,342)
Unrecognized prior service cost........... 8 6 (57) (143)
Unrecognized net actuarial gain........... (537) (2,035) (288) (289)
------- ------- ------- -------
Net amount recognized at end of year... $(1,246) $(1,322) $(2,597) $(2,774)
======= ======= ======= =======
</TABLE>
Assumptions used to determine net pension costs, pension projected benefit
obligation, net postretirement benefit costs and postretirement benefits
projected benefit obligation are as follows:
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
----------------- ---------------
1998 1999 1998 1999
------ ------ ----- -----
<S> <C> <C> <C> <C>
Weighted average assumptions as of measurement
date:
Discount rate................................... 6.75% 8.00% 6.75% 8.00%
Expected return on plan assets.................. 9.00% 9.00% N/A N/A
Rate of compensation increase................... 4.25% 5.00% 4.25% 5.00%
Health care cost trend on covered charges:
Initial......................................... N/A N/A 7.75% 7.75%
Ultimate........................................ N/A N/A 4.75% 5.50%
Years to ultimate............................... N/A N/A 6 5
=== === === ===
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for net postretirement benefits. A one-percentage-point change
in the health care cost trend rate would change the accumulated postretirement
benefits obligation by approximately $113 for December 31, 1999 and change net
postretirement benefit costs by approximately $16 for 1999.
F-14
<PAGE> 75
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(b) SAVINGS PLAN
The Company's employees participate in UCAR's savings plan which provides
eligible employees the opportunity for long-term savings and investment.
Participating employees can contribute 1.0% to 7.5% of employee compensation as
basic contributions and an additional 0.5% to 10.0% of employee compensation as
supplemental contributions. The Company contributes on behalf of each
participating employee an amount equal to 30% for 1997, and 50% for 1998 and
1999, of the employee's basic contribution. The Company contributed $103, $165
and $184 in 1997, 1998 and 1999, respectively.
(c) INCENTIVE PLANS
In 1997, UCAR provided group profit sharing plans for employees in various
subsidiaries. Costs for these profit sharing plans were $747 in 1997. Effective
January 1, 1998, UCAR implemented a global profit sharing plan for all worldwide
employees. This plan is based on the global financial performance of UCAR. The
cost for this plan related to Company employees was $664 in 1998 and nil in
1999.
Additionally, UCAR instituted a management incentive plan in which certain
of the Company's management participate. Costs allocated to the Company with
respect to this plan were $190, nil and $546 in 1997, 1998 and 1999,
respectively.
(9) STOCK OPTIONS
UCAR has adopted several stock option plans in which Company employees are
eligible to participate.
UCAR applies APB 25 in accounting for its stock-based compensation plans.
Accordingly, no compensation cost has been recognized for the time vesting
options issued to Company employees. The compensation expense that has been
charged against income for performance vesting options issued to Company
employees was $188 in 1997. If compensation expense for UCAR's stock-based
compensation plans was determined by the fair value method prescribed by
Statement of Financial Accounting Standards 123, the Company's pro forma net
income would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
--------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Net income:
As reported............................................ $6,258 $6,459 $3,583
Pro forma.............................................. 5,440 6,414 3,140
</TABLE>
The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions for grants in 1997, 1998 and 1999: dividend yield of 0.0% for all
years; expected volatility of 30% in 1997, 35% in 1998 and 45% in 1999;
risk-free interest rates of 6.4% in 1997, 4.9% in 1998 and 5.4% in 1999; and
expected lives of 7 years in 1997 and 1998, and 8 years in 1999.
(10) COMMITMENTS AND CONTINGENCIES
(a) LITIGATION
The Company is involved in various investigations, lawsuits, claims and
other legal proceedings incidental to the conduct of its business. Among others,
it is currently involved in a wrongful termination lawsuit brought in Italy by a
former distributor. The Company is vigorously contesting this lawsuit. While it
is not possible to determine the ultimate disposition of each of these
proceedings, the Company believes
F-15
<PAGE> 76
UCAR GRAPH-TECH INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
that the ultimate disposition of these proceedings will not have a material
adverse effect on the financial condition or results of operations of the
Company.
(b) BALLARD POWER SYSTEMS INC.
In 1999, the Company entered into two exclusive long-term agreements with
Ballard Power Systems Inc. including a supply agreement and a collaboration
agreement. The supply agreement provides that the Company will supply Ballard
with key products and materials for use in Ballard fuel cells. Under the supply
agreement, Ballard must buy all of its requirements for advanced flexible
graphite for flow field plates from the Company.
(11) SUBSEQUENT EVENT
GRAFTECH INC. (GRAFTECH) was incorporated in the State of Delaware on April
14, 2000. The certificate of incorporation of GRAFTECH authorizes the issuance
of up to 200,000,000 shares of $.01 par value common stock and 20,000,000 shares
of $.01 par value preferred stock. The holders of common stock will share
ratably in any dividends declared, subject to preferential rights of any holders
of any outstanding preferred stock. Holders of common stock are entitled to one
vote per share on all matters submitted to a vote of the stockholders, including
election of directors. Upon any liquidation, dissolution or winding up of
GRAFTECH, holders of common stock are entitled to share ratably in any assets
available for distribution to in respect of common stock. On April 17, 2000,
GRAFTECH issued 100 shares of common stock to UCAR in consideration for $100.
Prior to consummation of the offering, GRAFTECH will issue shares of common
stock to UCAR and agree to issue shares of common stock in respect of options to
purchase UCAR common stock issued by UCAR International in the event of a
distribution by UCAR International of shares of common stock held by it to its
stockholders in exchange for all of the issued and outstanding capital stock of
the Company. The Financial Statements have been retroactively restated to
reflect these transactions.
F-16
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated,
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $15,840
NASD filing fee............................................. 6,500
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses (including legal fees)........... *
Transfer agent and registrar fees and expenses.............. *
Miscellaneous............................................... *
-------
Total............................................. $ *
=======
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are incorporated under the laws of the State of Delaware. Section 145
("SECTION 145") of the General Corporation Law of the State of Delaware (the
"GENERAL CORPORATION LAW"), inter alia, provides that a Delaware corporation may
indemnify any person who was or is threatened to be made parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal.
Section 145 further authorizes a Delaware corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise against any liability asserted against him in any such
capacity, whether or not such corporation would otherwise have the power to
indemnify him under Section 145.
The certificate of incorporation of GRAFTECH includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to GRAFTECH or its
stockholders,
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
- under Section 174 of the General Corporation Law regarding unlawful
dividends and stock purchases, or
II-1
<PAGE> 78
- for any transaction from which the director derived an improper personal
benefit.
The Bylaws of GRAFTECH provide that:
- GRAFTECH must indemnify its directors and officers to the fullest extent
permitted by Delaware law,
- GRAFTECH may indemnify its other employees and agents to the same extent
that it is required to indemnify our officers and directors, unless
otherwise determined by our Board of Directors, and
- GRAFTECH must advance expenses, as incurred, to its directors and
officers in connection with any legal proceeding to the fullest extent
permitted by Delaware law.
In addition, GRAFTECH intends to obtain directors' and officers' insurance
in the amount of $ providing coverage for its directors, officers and
certain employees against certain liabilities, including liabilities arising
under securities laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our incorporation in April 2000, we have issued shares of
our common stock that were not registered under the Securities Act in
consideration of $ which we received from UCAR in connection with our
formation. Such issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) because it was a transaction by an issuer that did not
involve a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1* Underwriting Agreement, dated , 2000 among Credit
Suisse First Boston Corporation, on behalf of the
underwriters, UCAR International Inc. and GRAFTECH INC.
3.1** Certificate of Incorporation of GRAFTECH INC.
3.2** Bylaws of GRAFTECH INC.
5.1* Opinion of Kelley Drye & Warren LLP (including the consent
of such firm) as to the validity of the securities being
offered.
10.1** Transfer Agreement, dated as of January 1, 2000, between
UCAR Carbon Company Inc. and GRAFTECH INC.
10.2** Amendment to Transfer Agreement, dated as of February 14,
2000, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.3** Amendment No. 2 to Transfer Agreement, dated as of March 29,
2000, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.4** Corporate Services Agreement, dated as of January 1, 2000,
between UCAR International Inc. and GRAFTECH INC.
10.5** Technical Center Services Agreement, dated as of January 1,
2000, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.6** Employee Benefits Services and Liabilities Agreement,
undated, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.7** Assumption of the UCAR Carbon Retirement Plan by GRAFTECH
INC., dated December 31, 1999.
10.8** Assumption of the UCAR Carbon Savings Plan by GRAFTECH INC.,
dated December 31, 1999.
</TABLE>
II-2
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.9** Tax Allocation Agreement, dated as of January 1, 2000,
between UCAR International Inc. and GRAFTECH INC.
10.10** Lease Agreement, dated as of January 1, 2000, between UCAR
Carbon Company Inc. and GRAFTECH INC.
10.11** Intellectual Property Transfer Agreement, dated as of
December 28, 1999, between UCAR Carbon Technology
Corporation and GRAFTECH INC.
10.12*** Collaboration Agreement, dated May 3, 1999, between Ballard
Power Systems Inc. and UCAR Carbon Company Inc.
10.13*** Supply Agreement, dated as of August 5, 1999, between UCAR
Carbon Company Inc. and Ballard Power Systems Inc.
10.14* 2000 Employee Equity Incentive Plan
10.15* 2000 Outside Directors Equity Incentive Plan
23.1* Consent of Kelley Drye & Warren LLP (included in Exhibit
5.1)
23.2** Consent of KPMG LLP
24.1 Power of Attorney (on the signature page)
27.1** Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
** Filed herewith
*** Filed herewith. Confidential treatment requested as to certain portions
(b) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are not
required or applicable or because the information is included in the Financial
Statements or the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
II-3
<PAGE> 80
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 81
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cleveland,
Ohio, on the 18th day of April, 2000.
GRAFTECH INC.
By: /s/ JOHN J. WETULA
------------------------------------
John J. Wetula
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below hereby constitutes and appoints Gilbert E. Playford, John J.
Wetula, Erick A. Asmussen, William C. P'Pool and Karen G. Narwold, and each of
them individually, his true and lawful agent, proxy and attorney-in-fact, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to (i) act on, sign and file with the
Securities and Exchange Commission any and all amendments to this registration
statement (which includes any additional registration statement under Rule
462(b)) together with all schedules and exhibits thereto, (ii) act on, sign and
file with the Securities and Exchange Commission any and all exhibits to this
registration statement and any and all exhibits and schedules thereto, (iii) act
on, sign and file any and all applications, registration statements, notices,
reports and other documents necessary or appropriate in connection with the
registration or qualification under foreign and state securities laws of the
securities described in this registration statement or any amendment thereto, or
obtain an exemption therefrom, in connection with the offering described
therein, (iv) act on, sign and file any and all applications, notices, reports
and other documents necessary or appropriate in connection with listing the
common stock described in this registration statement or any amendment thereto
on The Nasdaq National Market or any other stock market or securities exchange
in connection with such offering, (v) act on, sign and file any and all such
certificates, instruments, agreements and other documents as may be necessary or
appropriate in connection therewith and (vi) take any and all such actions which
may be necessary or appropriate in connection therewith, granting unto such
agents, proxies and attorneys-in-fact, and each of them individually, full power
and authority to do and perform each and every act and thing necessary or
appropriate to be done, as fully for all intents and purposes as he might or
could do in person, hereby approving, ratifying and confirming all that such
agents, proxies and attorneys-in-fact, any of them or any of his or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ GILBERT E. PLAYFORD Chairman of the Board April 18, 2000
- --------------------------------------------------- and Director
Gilbert E. Playford
/s/ JOHN J. WETULA Chief Executive Officer, President April 18, 2000
- --------------------------------------------------- and Director (Principal
John J. Wetula Executive, Financial and
Accounting Officer)
</TABLE>
II-5
<PAGE> 82
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.1 Certificate of Incorporation of GRAFTECH INC.
3.2 Bylaws of GRAFTECH INC.
10.1 Transfer Agreement, dated as of January 1, 2000, between
UCAR Carbon Company Inc. and GRAFTECH INC.
10.2 Amendment to Transfer Agreement, dated as of February 14,
2000, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.3 Amendment No. 2 to Transfer Agreement, dated as of March 29,
2000, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.4 Corporate Services Agreement, dated as of January 1, 2000,
between UCAR International Inc. and GRAFTECH INC.
10.5 Technical Center Services Agreement, dated as of January 1,
2000, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.6 Employee Benefits Services and Liabilities Agreement,
undated, between UCAR Carbon Company Inc. and GRAFTECH INC.
10.7 Assumption of the UCAR Carbon Retirement Plan by GRAFTECH
INC., dated December 31, 1999.
10.8 Assumption of the UCAR Carbon Savings Plan by GRAFTECH INC.,
dated December 31, 1999.
10.9 Tax Allocation Agreement, dated as of January 1, 2000,
between UCAR International Inc. and GRAFTECH INC.
10.10 Lease Agreement, dated as of January 1, 2000, between UCAR
Carbon Company Inc. and GRAFTECH INC.
10.11 Intellectual Property Transfer Agreement, dated as of
December 28, 1999, between UCAR Carbon Technology
Corporation and GRAFTECH INC.
10.12 Collaboration Agreement, dated May 3, 1999, between Ballard
Power Systems Inc. and UCAR Carbon Company Inc.
10.13 Supply Agreement, dated as of August 5, 1999, between UCAR
Carbon Company Inc. and Ballard Power Systems Inc.
23.2 Consent of KPMG LLP
27.1 Financial Data Schedule
</TABLE>
II-6
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
GRAFTECH INC.
The undersigned, M. Ridgway Barker, hereby certifies that:
FIRST: NAME
The name of this corporation is GRAFTECH INC. (the
"Corporation").
SECOND: ADDRESS
The address, including street number, street, city and county,
of the registered office of the Corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New
Castle. The name of the registered agent of the Corporation in the State of
Delaware at such address is The Corporation Trust Company.
THIRD: PURPOSE
The nature of the businesses to be conducted and the purposes
to be promoted by the Corporation is engaging in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware (the "Law").
FOURTH: POWERS
In order to conduct its businesses and promote and accomplish
its purposes, the Corporation shall have and may exercise all of the powers
conferred by the Law upon corporations formed thereunder.
FIFTH: PERPETUAL EXISTENCE
The Corporation shall have perpetual existence.
SIXTH: CAPITAL STOCK
The aggregate number of shares of all classes of capital stock
which the Corporation shall have authority to issue (the "Capital Stock") is two
hundred and twenty million (220,000,000), of which two hundred million
(200,000,000) shall be common stock, par value $.01 per share (the "Common
Stock"), and twenty million (20,000,000) shall be preferred stock, par value
$.01 per share (the "Preferred Stock").
Shares of Preferred Stock may be issued in one or more series.
The number of shares included in any series of Preferred Stock and the full or
limited voting rights, if any, the cumulative or non-cumulative dividend rights,
if any, the conversion, redemption or sinking fund
<PAGE> 2
rights, if any, and the priorities, preferences and relative, participating,
optional and other special rights, if any, in respect of the Preferred Stock,
any series of Preferred Stock or any rights pertaining thereto, and the
qualification, limitations or restrictions on the Preferred Stock, any series of
Preferred Stock or any rights pertaining thereto, shall be those set forth in
the resolution or resolutions providing for the issuance of the Preferred Stock
or such series of Preferred Stock adopted at any time and from time to time by
the affirmative vote of a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors of
the Corporation (the "Board") at the time of the vote (the "Whole Board") on
such resolution or resolutions and filed with the Secretary of State of the
State of Delaware. The Board is hereby expressly vested with authority, to the
full extent now or hereafter provided by the Law, to adopt any and all such
resolution or resolutions.
SEVENTH: DIRECTORS
The business and affairs of the Corporation shall be managed
by or under the direction of the Board. Subject to any limitations which may be
set forth in the By-Laws (as defined herein) and subject to the right, if any,
of holders of shares of Preferred Stock then outstanding to elect additional
directors expressly set forth in the resolution or resolutions providing for the
issuance of such shares, the Whole Board shall consist of that number of
directors as may be fixed from time to time and at any time by a resolution or
resolutions adopted by the affirmative vote of a majority of the Whole Board as
constituted prior to such vote, except that such number shall not be less than
one (1) and shall not be more than fifteen (15). Commencing at the first time at
which the Principal Stockholder (as defined herein) ceases to directly or
indirectly hold or own either a majority of the shares of Common Stock then
outstanding or a majority of the voting power of the Capital Stock then
outstanding, the Whole Board shall be divided into three (3) classes on such
basis as the Board, pursuant to a resolution or resolutions adopted by the
affirmative vote of a majority of the Whole Board shall determine, except that
the number of directors in each class shall be as nearly equal as practicable.
Except as otherwise provided herein, the term of office of each class of
directors shall be three (3) years, commencing at the annual meeting of
stockholders at which directors of that class are first duly elected and
continuing until the successor directors of such class are duly elected at the
third following annual meeting of stockholders. The initial term of office of
the first class of directors shall expire at the first annual meeting of
stockholders following such time, of the second class of directors shall expire
at the second annual meeting of stockholders following such time, and of the
third class of directors shall expire at the third annual meeting of
stockholders following such time.
Except as otherwise provided in the By-Laws, the election of
directors is not required to be conducted by written ballot.
Except for the right, if any, of holders of shares of
Preferred Stock then outstanding to remove one or more directors expressly set
forth in the resolution or resolutions providing for the issuance of such shares
and except as otherwise required by the Law, commencing at the first time at
which the Principal Stockholder (as defined herein) ceases to directly or
indirectly hold or own either a majority of the shares of Common Stock then
outstanding or a majority of the voting power of the Capital Stock then
outstanding, directors can be removed only for cause and only upon the
affirmative vote of holders of at least 67% of the voting power of all shares of
capital stock of the Corporation then outstanding entitled to vote generally for
the election of directors.
Except for the right, if any, of holders of shares of
Preferred Stock then outstanding to fill such vacancies expressly set forth in
the resolution or resolutions providing for the issuance of such shares and
except as otherwise required by the Law, any vacancies on the
2
<PAGE> 3
Board resulting from an increase in the authorized number of directors, from
death, resignation, retirement, disqualification or removal of a director or
from any other event can be filled (and can only be filled) by a majority vote
of the directors then in office (even though they constitute less than a
quorum), unless no directors are then in office in which event (but only in
which event) such vacancies can be filled by the stockholders. A director
elected to fill such a vacancy shall hold office until the next annual meeting
of stockholders for the class of directors of which such director is a member.
Each director shall serve in office until his or her successor
shall be elected and qualified (which may be such director, if he or she is
re-elected) or his or her earlier death, resignation or removal. No decrease in
the authorized number of directors shall shorten the term of any incumbent
director.
In connection with managing the business and affairs of the
Corporation, including, but not limited to, determining whether and to what
extent any action may be in the best interests of the Corporation or the
stockholders, approving or disapproving any action or determining whether to
make any recommendation and what recommendation to make to stockholders with
respect to any matter, each director and the Board (and any committee of the
Board) may consider: (i) the long-term and short-term interests of the
employees, suppliers, creditors and customers of the Corporation and its
subsidiaries; (ii) the long-term and short-term interests of the communities in
which the Corporation and its subsidiaries conduct any business or other
activities; and (iii) the long-term and short-term interests of the Corporation,
its subsidiaries and the stockholders, including the possibility that such
interests may best be served by the continued independence of the Corporation.
EIGHTH: VOTING
Except for the right, if any, of holders of shares of
Preferred Stock then outstanding to cumulate votes expressly set forth in the
resolution or resolutions providing for the issuance of such shares, cumulative
voting is not permitted with respect to the election of directors.
Except as otherwise permitted with respect to actions required
or permitted to be taken solely by holders of shares of Preferred Stock then
outstanding as expressly set forth in the resolution or resolutions providing
for the issuance of such shares and subject to the next sentence, any and all
actions required or permitted to be taken by the stockholders must be taken at a
duly called and convened meeting of stockholders and cannot be taken by consent
in writing. The preceding sentence shall not apply to any action required or
permitted to be taken by (i) the Principal Stockholder (as defined herein) at a
time when the Principal Stockholder directly or indirectly holds or owns either
a majority of the shares of Common Stock then outstanding or a majority of the
voting power of the Capital Stock then outstanding or (ii) the stockholders at a
time when the Principal Stockholder directly or indirectly holds or owns at
least 20% of the shares of Common Stock then outstanding or at least 20% of the
voting power of the Capital Stock then outstanding so long as the Principal
Stockholder gives the first valid consent in writing to such action. References
herein to a vote of one or more stockholders shall include consent in writing of
stockholders permitted (but only permitted) by the preceding sentence.
3
<PAGE> 4
Except as otherwise permitted with respect to meetings
consisting solely of holders of shares of Preferred Stock then outstanding as
expressly set forth in the resolution or resolutions providing for the issuance
of such shares, special meetings of stockholders can be called only (a) by or at
the direction of the Board pursuant to a resolution or resolutions adopted by
the affirmative vote of a majority of the Whole Board, (b) by or at the
direction of the Principal Stockholder or a director affiliated with the
Principal Stockholder, (c) by or at the direction of a committee of the Board
which has been expressly authorized by the Board pursuant to a resolution or
resolutions adopted by the affirmative vote of a majority of the Whole Board to
call special meetings of stockholders or (d) by the chairman of the board, chief
executive officer or president of the Corporation.
As used herein, "Principal Stockholder" means (i) UCAR
International Inc. and each of its wholly-owned or majority-owned subsidiaries
(other than the Corporation) so long as collectively they directly or indirectly
hold or own at least 20% of the shares of Common Stock then outstanding or at
least 20% of the voting power of the Capital Stock then outstanding and (ii)
each of their initial and subsequent transferees (including any and all secured
lenders to whom Capital Stock is transferred as a result of a foreclosure on
collateral following on the occurrence of an event of default under the relevant
loan or credit agreements and related documents or otherwise in discharge or
satisfaction of indebtedness) whom the immediately preceding Principal
Stockholder designates as such so long as the transferee so designated and its
wholly-owned and majority owned subsidiaries directly or indirectly holds or
owns at least 20% of the shares of Common Stock then outstanding or at least 20%
of the voting power of the Capital Stock then outstanding. Individuals and
entities which would constitute Principal Stockholders shall not cease to be
such solely because Capital Stock is held or owned for their account by nominees
or collateral or other agents.
NINTH: BY-LAWS
Subject to the next three sentences, the By-Laws of the
Corporation approved by the sole incorporator (the "By-Laws") shall be the
By-Laws.
All or any part of the By-Laws may be amended or repealed and
new By-Laws may be adopted at any time and from time to time pursuant to (but
only pursuant to) a resolution or resolutions adopted by the affirmative vote of
a majority of the Whole Board, but subject to the power of the holders of shares
of Capital Stock then outstanding to adopt, amend or repeal the By-Laws as
provided in the next paragraph and subject to the limitations set forth in the
By-Laws.
Subject to the next sentence, all or any part of the By-Laws
may be amended or repealed and new By-Laws may be adopted by the stockholders
upon (but only upon) the affirmative vote of holders of at least 67% of the
voting power of all shares of Capital Stock then outstanding entitled to vote
generally for the election of directors. The reference to 67% in the preceding
sentence shall be deemed to refer to a majority of the shares of Capital Stock
then outstanding which are present and entitled to vote thereon if the Principal
Stockholder votes in favor of such amendment, repeal or adoption.
TENTH: EXCULPATION
4
<PAGE> 5
A director shall not be personally liable to the Corporation
or the stockholders for monetary damages for breach of fiduciary duty as a
director, except (i) for any breach of the duty of loyalty of such director to
the Corporation or such holders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Law and (iv) for any transaction from which such director
derives an improper personal benefit. If the Law is hereafter amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director shall be eliminated or
limited to the fullest extent permitted by the Law, as so amended. No repeal or
modification of this Article TENTH shall adversely affect any right of or
protection afforded to a director prior to such repeal or modification.
ELEVENTH: AMENDMENTS
Notwithstanding any other provision contained in this
Certificate of Incorporation and notwithstanding that a lesser percentage may be
specified by law, the By-Laws or otherwise, but subject to the next sentence,
Articles SEVENTH, EIGHTH, NINTH and TENTH of this Certificate of Incorporation
and this Article ELEVENTH shall not be amended or repealed, and no provision
inconsistent therewith or providing for cumulative voting in the election of
directors shall be adopted, unless such adoption, amendment or repeal is
approved by the affirmative vote of holders of at least 67% of the voting power
of all shares of Capital Stock then outstanding entitled to vote generally for
the election of directors. The reference to 67% in the preceding sentence shall
be deemed to refer to a majority of the shares of Capital Stock then outstanding
which are present and entitled to vote thereon if the Principal Stockholder
votes in favor of such amendment, repeal or adoption.
Subject to the immediately preceding paragraph of this Article
ELEVENTH, the Corporation reserves the right to amend, alter, change or repeal
any provision contained herein in the manner now or hereafter prescribed by law.
TWELFTH: COMPROMISE
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
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THIRTEENTH: SOLE INCORPORATOR
The name of the sole incorporator of the Corporation is M.
Ridgway Barker. His address is c/o Kelley Drye & Warren LLP, Two Stamford Plaza,
281 Tresser Boulevard, Stamford, Connecticut 06901.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate of Incorporation on this 14th day of April, 2000.
/s/ M. Ridgway Barker
-------------------------
Sole Incorporator
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Exhibit 3.2
BY-LAWS
OF
GRAFTECH INC.
_______________, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I - MEETINGS OF STOCKHOLDERS.............................................................................1
Section 1. Place of Meetings...........................................................................1
Section 2. Annual Meeting..............................................................................1
Section 3. Special Meetings............................................................................1
Section 4. Record Date.................................................................................1
Section 5. Notice of Meetings; Waiver..................................................................2
Section 6. List of Stockholders........................................................................3
Section 7. Quorum; Manner of Acting....................................................................3
Section 8. Business Transacted.........................................................................4
Section 9. Order of Business; Voting...................................................................6
Section 10. Inspectors.................................................................................7
ARTICLE II - BOARD OF DIRECTORS..................................................................................7
Section 1. Powers; Qualifications; Number; Election....................................................7
Section 2. Term of Office of a Director................................................................8
Section 3. Resignations; Filling of Vacancies..........................................................8
Section 4. Meetings of the Board; Notice; Waiver.......................................................8
Section 5. Quorum; Adjournment.........................................................................9
Section 6. Manner of Acting............................................................................9
Section 7. Annual Meeting of Directors................................................................10
Section 8. Participation in Meeting by Telephone......................................................10
Section 9. Compensation and Expenses of Directors.....................................................10
ARTICLE III - COMMITTEES OF THE BOARD...........................................................................10
Section 1. Regular Committees.........................................................................10
Section 2. Regular Committee Powers...................................................................10
Section 3. Advisory Committees........................................................................11
Section 4. Procedures.................................................................................11
ARTICLE IV - OFFICERS...........................................................................................12
Section 1. Officers...................................................................................12
Section 2. President..................................................................................12
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Section 3. Vice Presidents............................................................................12
Section 4. Treasurer..................................................................................12
Section 5. Secretary..................................................................................13
Section 6. Additional Officers and Appointed Officers.................................................13
Section 7. Removal....................................................................................14
Section 8. Resignations...............................................................................14
Section 9. Giving of Bond by Officers.................................................................14
Section 10. Compensation of Officers..................................................................14
Section 11. Term of Office............................................................................14
Section 12. Voting Stock Held by Corporation..........................................................14
ARTICLE V - INDEMNIFICATION.....................................................................................15
Section 1. Indemnification............................................................................15
Section 2. Indemnification Not Exclusive..............................................................16
Section 3. Successors.................................................................................16
Section 4. Insurance..................................................................................17
Section 5. Definition of Certain Terms................................................................17
ARTICLE VI - CONTRACTS; BANK ACCOUNTS...........................................................................17
Section 1. Execution of Contracts.....................................................................17
Section 2. Checks; Drafts; Notes......................................................................17
Section 3. Deposits...................................................................................18
ARTICLE VII - SHARES; DIVIDENDS.................................................................................18
Section 1. Certificates...............................................................................18
Section 2. Transfers..................................................................................18
Section 3. Lost or Destroyed Certificates.............................................................19
Section 4. Fractions of a Share.......................................................................19
Section 5. Dividends..................................................................................19
ARTICLE VIII - CORPORATE SEAL...................................................................................19
ARTICLE IX - FISCAL YEAR........................................................................................19
ARTICLE X - AMENDMENTS..........................................................................................20
</TABLE>
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ARTICLE I - MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings.
All meetings of stockholders shall be held at the registered office of
the Corporation in the State of Delaware or at such other places within or
without the State of Delaware as may be specified in the notices of such
meetings.
Section 2. Annual Meeting.
An annual meeting of stockholders for the election of directors and the
transaction of such other business as may be properly brought before such
meeting shall be held on (i) the third Tuesday of May in each and every year, if
that day is a business day, or, if that day is not a business day, on the next
following day which is a business day or (ii) such date as the Board of
Directors (the "Board") may from time to time determine. Any annual meeting of
stockholders may be adjourned from time to time until the business to be
transacted at such meeting is completed.
Section 3. Special Meetings.
Special meetings of stockholders can be called only as provided in the
Certificate of Incorporation of the Corporation, as then in effect (the
"Certificate of Incorporation"). Each such meeting shall be called by giving
notice to that effect to the Secretary not more than sixty-five (65) days and
not less than fifteen (15) days before the date of such meeting. Such notice
shall state the place, date, hour and purpose or purposes of such meeting. Any
special meeting may be adjourned in accordance with Section 5(c) of this Article
I from time to time until the business to be transacted at such meeting is
completed.
Section 4. Record Date.
(a) In order to determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the Board may
fix a record date, which record date shall not precede the date upon which the
resolution fixing such record date is adopted by the Board and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the close of business on the day next preceding the day on
which notice of such meeting is given or, if such notice is waived by all of the
stockholders, the close of business on the day next preceding the day on which
such meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board may fix a new record date for
such adjourned meeting.
(b) In order to determine the stockholders entitled to consent to
action in writing without a meeting, the Board may fix a record date, which
record date shall not precede the date upon which the resolution fixing such
record date is adopted by the Board and which record date
<PAGE> 5
shall not be more than ten (10) days after the date upon which the resolution
fixing such record date is adopted by the Board. If no record date is fixed by
the Board, the record date for determining stockholders entitled to consent to
action in writing without a meeting, when no prior action by the Board is
required by the General Corporation Law of the State of Delaware, as then in
effect (the "Law"), shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation at its registered office in the State of Delaware, its principal
place of business or an officer or agent of the Corporation having custody of
the books in which proceedings of meeting of stockholders are recorded. Delivery
made to the Corporation at its registered office shall be made by personal
delivery or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board and prior action by the Board is
required by the Law, the record date for determining stockholders entitled to
consent to action in writing without a meeting shall be the close of business on
the day on which the Board adopts the resolution taking such prior action.
(c) In order to determine the stockholders (i) entitled to receive
payment of any dividend or other distribution or allotment of any rights or to
exercise any rights in respect of any change, conversion or exchange of shares
of capital stock of the Corporation or (ii) for the purpose of any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing such record date is adopted and which
record date shall be not more than sixty (60) days prior to such action. If no
record date is fixed, the record date for determining stockholders therefor
shall be at the close of business on the day on which the Board adopts the
resolution relating to such action.
Section 5. Notice of Meetings; Waiver.
(a) Each notice of each meeting of stockholders shall state the place,
date and hour of such meeting and, unless it is an annual meeting of
stockholders, shall indicate that it is being sent by or at the direction of the
person or persons calling such meeting and state the purpose or purposes for
which such meeting is being called. If at any meeting of stockholders action is
proposed to be taken which would, if taken, give stockholders fulfilling the
requirements of Section 262 of the Law the right to receive payment for their
shares of capital stock of the Corporation, the notice of such meeting shall
include a statement of such proposed action and such right. Not less than ten
(10) nor more than sixty (60) days before the date of such meeting, the
Secretary shall give or cause to be given a copy of the notice of such meeting,
either by personal delivery or by mail, to each person entitled to notice of
such meeting. If mailed, such notice shall be deemed to have been given to a
stockholder when it is deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the stock records of
the Corporation or, if he shall have filed with the Secretary a written request
that notices to him be mailed to some other address, then directed to him at
such other address.
(b) A written waiver of notice of a meeting of stockholders signed by a
stockholder entitled to notice of such meeting, before or after such meeting,
shall be deemed to be equivalent to the giving of proper notice to such
stockholder of such meeting. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
such stockholder attends such meeting for the express purpose of objecting, at
the commencement of such meeting, to the transaction of any business at such
meeting because such
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meeting was not lawfully called or convened. Neither the business to be
transacted at nor the purpose of any meeting of stockholders is required to be
specified in any written waiver of notice of such meeting.
(c) When a meeting of stockholders is adjourned to another time or
place, it shall not be necessary to give any notice of the adjourned meeting if
the time and place to which such meeting is adjourned are announced at such
meeting. Any business may be transacted at such adjourned meeting which might
have been transacted at such meeting. If the adjournment is for more than thirty
(30) days or if, after such adjournment, the Board fixes a new record date for
such adjourned meeting, a notice of such adjourned meeting shall be given to
each person entitled to notice of such adjourned meeting.
Section 6. List of Stockholders.
The Secretary shall prepare, at least ten (10) days prior to each
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, arranged in alphabetical order and showing the address of each
such stockholder and the number of shares held of record by each such
stockholder. Such list shall be open for inspection by any stockholder, for
purposes germane to such meeting, during ordinary business hours, for the ten
(10) days prior to such meeting, either at a place in the city where such
meeting is to be held, which place shall be specified in the notice of such
meeting, or, if not so specified, at the place where such meeting is to be held.
Such list shall also be produced and kept open at such meeting during the whole
time thereof and may be inspected by any stockholder who is present thereat. The
stock records of the Corporation shall be conclusive evidence as to who are the
stockholders entitled to examine such stock records, the list described in this
Section 6 or the books of the Corporation or to vote at any meeting of
stockholders.
Section 7. Quorum; Manner of Acting.
(a) Except as otherwise required by the Law or the Certificate of
Incorporation or as provided with respect to meetings consisting solely of
holders of shares of Preferred Stock in the resolution or resolutions providing
for the issuance of such shares, the presence, at the commencement of such
meeting, in person or by proxy of holders of a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote at a
meeting of stockholders shall be required in order to constitute a quorum for
the transaction of business thereat.
(b) If a quorum shall not be present at the commencement of any meeting
of stockholders, a majority of the stockholders present in person or by proxy
may adjourn such meeting to another time and place.
(c) Except as otherwise required by the Law or the Certificate of
Incorporation and as otherwise provided in these By-Laws with respect to the
election of directors and except as otherwise provided with respect to meetings
consisting solely of holders of shares of Preferred Stock in the resolution on
resolutions providing for the issuance of such shares, a matter submitted to a
vote at a meeting of stockholders shall have been approved only if a quorum was
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present at the commencement of such meeting and the holders of a majority of the
issued and outstanding shares of the capital stock of the Corporation entitled
to vote on such matter shall have voted to approve such matter.
(d) Every stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by proxy. Such authorization
must be granted by a means expressly permitted by the Law. No proxy shall be
voted or acted upon after three (3) years from its date unless such proxy
provides that it may be voted or acted upon for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the relevant meeting of stockholders and voting or acting in
person, by filing with the Secretary a written instrument revoking such proxy or
by filing with the Secretary another duly executed proxy bearing a later date.
Section 8. Business Transacted.
(a) No business shall be transacted at any meeting of stockholders
unless it shall have been brought before such meeting in accordance with this
Section 8(a) of this Article I. Business may be brought (i) before a special
meeting of stockholders only by or at the direction of the Board or by the
person or persons calling such meeting as expressly permitted by the Certificate
of Incorporation or (ii) before an annual meeting of stockholders only (a) by or
at the direction of the Board or by any other person or persons who could call a
special meeting of stockholders as expressly permitted by the Certificate of
Incorporation or (b) by a stockholder who is entitled to vote thereon at such
meeting and who complies with the procedures set forth in this Section 8(a) of
this Article I. For business to be properly brought before an annual meeting of
stockholders by a stockholder as permitted by clause (ii)(b) of the preceding
sentence, such stockholder must have given timely notice of his intention to do
so in writing to the Secretary. To be timely, such notice must be delivered or
mailed to, and received at, the principal executive office of the Corporation
not less than one hundred five (105) days prior to the meeting; provided,
however, that if less than one hundred five (105) days' notice or prior public
disclosure of the date of such meeting is given to stockholders or made, such
notice must be so delivered or mailed, and received, not later than the close of
business on the tenth (10th) day following the day on which notice or public
disclosure of the date of such meeting is given to stockholders or made (except
that this proviso shall not apply if such meeting is an annual meeting which
will be held on the date specified in clause (i) of Section 2 of Article I or
within thirty (30) days thereafter). Such notice must set forth as to each
matter such stockholder proposes to bring before such meeting (i) a brief
description (which includes all of the material aspects thereof) of the business
desired to be brought before such meeting and the reasons for conducting such
business at such meeting, (ii) the name and address, as they appear on the stock
records of the Corporation, of the stockholder desiring to propose such
business, (iii) the classes and number of shares of each class of capital stock
of the Corporation that are owned beneficially and of record by such
stockholder, his affiliates, all groups of which he is a member and all persons
with whom he is acting in concert (in each case, identifying them) and (iv) any
material direct or indirect interest of such stockholder, affiliates, groups or
persons in such business. The chairman of such meeting shall determine whether
any business to be brought before such meeting will be properly so brought in
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accordance with this Section 8(a) of this Article I and, if he should determine
that such business will not be properly so brought, he shall so declare at such
meeting and such business shall not be transacted at such meeting.
(b) No individual shall be eligible for election as a director unless
he is nominated in accordance with this Section 8(b) of this Article I.
Nominations of individuals for election as directors may be made at a meeting of
stockholders at which directors are to be elected only (i) by or at the
direction of the Board or by any other person or persons who could call a
special meeting of stockholders as expressly permitted by the Certificate of
Incorporation or (ii) by a stockholder who is entitled to vote for the election
of directors at such meeting and who complies with the procedures set forth in
this Section 8(b) of this Article I. For nominations to be properly made at a
meeting by a stockholder as permitted by clause (ii) of the preceding sentence,
such stockholder must have given timely notice of his intention to do so in
writing to the Secretary. To be timely, such notice must be delivered or mailed
to, and received at, the principal executive office of the Corporation not less
than one hundred five (105) days prior to such meeting; provided, however, that
if less than one hundred five (105) days' notice or prior public disclosure of
the date of such meeting is given to stockholders or made, such notice must be
so delivered or mailed, and received, not later than the close of business on
the tenth (10th) day following the day on which notice or public disclosure of
the date of such meeting is given to stockholders or made (except that this
proviso shall not apply if such meeting is an annual meeting which will be held
on the date specified in clause (i) of Section 2 of Article I or within thirty
(30) days thereafter). Such notice must set forth: (i) as to each individual
whom such stockholder proposes to nominate for election as a director, (a) the
name, date of birth, business address and residential address of such
individual, (b) the principal occupation or employment of such individual for at
least the five years preceding the date of such notice, (c) the classes and
number of each class of the capital stock of the Corporation that are owned
beneficially and of record by such individual, his affiliates, all persons with
whom he is acting in concert and all groups of which he is a member (in each
case, identifying them) and (d) all information relating to such individual that
is required to be disclosed in solicitations of proxies for election of
directors pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder (including each such
individual's written consent to serve as director if elected); and (ii) as to
the stockholder giving such notice, (A) the name and address of such
stockholder, as they appear on the stock records of the Corporation, (B) the
classes and number of shares of each class of capital stock of the Corporation
that are owned beneficially and of record by such stockholder, his affiliates,
all persons acting in concert with him and all groups of which he is a member
(in each case, identifying them) and (C) any professional, commercial, business
or familial relationship of such stockholder, affiliates, persons or groups (in
each case, identifying them) to such nominees, his affiliates, any person acting
in concert with him or any group of which he is a member (in each case,
identifying them). The chairman of such meeting shall determine whether any
nomination to be made at such meeting will be properly so made in accordance
with this Section 8(b) of this Article I and, if he should determine that such
nomination will not be properly so made, he shall so declare at such meeting and
such nomination shall not be made at such meeting.
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(c) For the purposes of this Section 8 of this Article I, "acting in
concert" and "group" shall have the same meanings as they have under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
Section 9. Order of Business; Voting.
(a) The Chairman of the Board or, in the absence of the Chairman of the
Board (including an absence because no Chairman of the Board shall have been
designated), the President, or, in the absence of both of them, a Vice
President, or, in the absence of all of them, a person designated by the Board,
or in the absence of all of them, a person designated by the holders of a
majority of the outstanding shares of capital stock of the Corporation present
in person or by proxy and entitled to vote at such meeting shall act as the
chairman of such meeting. The chairman of each meeting of stockholders shall
call such meeting to order, determine the order of business at such meeting and
otherwise preside over such meeting.
(b) The Secretary shall act as secretary of each meeting of
stockholders and keep the minutes thereof, but, in the absence of the Secretary,
the chairman of such meeting shall appoint some other person to act as secretary
of such meeting.
(c) Unless required by the Law, requested by any stockholder present in
person or by proxy and entitled to vote at such meeting or directed by the
chairman of such meeting, neither the vote for the election of directors nor
upon any other business before any meeting of stockholders is required to be
conducted by written ballot. On a vote by written ballot, (i) each written
ballot cast by a stockholder voting in person shall state the name of such
stockholder, the number of shares of capital stock of the Corporation held of
record by him and the number of such shares voted by him and (ii) each ballot
cast by proxy shall bear the name of such proxy, the name of the stockholder for
whom he is voting, the number of shares of capital stock of the Corporation held
of record by such stockholder and the number of such shares voted on behalf of
such stockholder.
(d) Shares of capital stock of the Corporation held by the Corporation
or any of its majority-owned subsidiaries in treasury shall not be shares
entitled to vote at, or to be counted in determining the presence of a quorum
for, any meeting of stockholders or be counted in determining the total number
of outstanding shares of capital stock of the Corporation. This Section 9(c)
shall not limit the right of the Corporation or any of its subsidiaries to vote
any shares of capital stock of the Corporation held by the Corporation or such
subsidiary in a fiduciary capacity.
(e) To the extent (but only to the extent) expressly provided in the
Certificate of Incorporation, action required or permitted to be taken at a
meeting of stockholders may be taken without a meeting, without any prior notice
and without a vote thereon, if stockholders having not less than the minimum
number of votes that would be necessary to take such action at a meeting at
which all stockholders entitled to vote thereon were present and voting, consent
in writing to such action and such writing or writings are filed with the
minutes of proceedings of the stockholders. Prompt written notice of the taking
of such action shall be given by the Secretary to all stockholders who have not
consented in writing to such action.
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Section 10. Inspectors.
(a) The Board in advance of any meeting of stockholders may (and shall,
if required by the Law) appoint one or more inspectors to act at such meeting or
any adjournment thereof. If inspectors are not so appointed, the chairman of
such meeting may and, on request of any stockholder present in person or by
proxy and entitled to vote at such meeting, shall appoint one or more such
inspectors. No director, nominee for director, officer or employee of the
Corporation shall be appointed as an inspector. Inspectors need not be
stockholders. In case any person so appointed fails to appear or act, the
vacancy may be filled by appointment of another person by the Board in advance
of such meeting or at such meeting by the chairman of such meeting.
(b) Each inspector appointed to act at any meeting of stockholders
shall, before entering upon the discharge of his duties, take and sign an oath
to execute faithfully the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. Such inspectors shall (i)
determine the number of shares outstanding and the voting power of each such
share, the number of shares represented at such meeting, the existence of a
quorum and the validity and effect of proxies, (ii) receive votes or ballots,
(iii) hear and determine all challenges and questions arising in connection with
the right to vote, (iv) count and tabulate all votes or ballots, (v) determine
the result and (vi) do all acts which may be proper in connection with
conducting a vote at such meeting, with fairness to all stockholders. On the
request of the chairman of such meeting or any stockholder present in person or
by proxy and entitled to vote at such meeting, the inspectors shall make a
report in writing of any challenge, question or matter determined by them and
execute a certificate of any fact found by them. Any such report or certificate
shall be prima facie evidence of the facts so stated and of the vote so
certified.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Powers; Qualifications; Number; Election.
(a) The business and affairs of the Corporation shall be managed by or
under the direction of the Board. Except as otherwise provided in the
Certificate of Incorporation, the Board may exercise all of the authority and
powers of the Corporation and do all of the lawful acts and things which are not
by the Law, the Certificate of Incorporation or these By-Laws directed or
required to be exercised or done by the stockholders. The directors shall act
only as a board and the individual directors shall have no power as such. Each
director shall be at least twenty-five (25) years of age. A director is not
required to be a resident of the State of Delaware or a stockholder. The Board
shall consist of that number of directors as shall be fixed in accordance with
the Certificate of Incorporation.
(b) At all elections of directors by stockholders entitled to vote
thereon, the individuals receiving a plurality of the votes cast shall be deemed
to have been elected as directors.
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Section 2. Term of Office of a Director.
The term of office of each director shall commence and continue as
provided in the Certificate of Incorporation.
Section 3. Resignations; Filling of Vacancies.
(a) Any director may resign at any time by giving written notice of his
resignation to the Board or the Secretary. Such resignation shall take effect at
the time of receipt of such notice by the Board or the Secretary, as the case
may be, or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
(b) Any vacancy on the Board can be filled as (but only as) provided in
the Certificate of Incorporation. A director elected to fill such a vacancy
shall hold office as provided in the Certificate of Incorporation.
Section 4. Meetings of the Board; Notice; Waiver.
(a) All regular meetings of the Board shall be held at such places
within or without the State of Delaware as may be fixed by the Board. All
special meetings of the Board shall be held at such places within or without the
State of Delaware as may be specified in the notices of such meetings.
(b) Regular meetings of the Board for the transaction of such business
as may be properly brought before such meetings shall be held on such dates and
at such times as may be fixed by the Board. Notices of such regular meetings are
not required to be given.
(c) Special meetings of the Board may be called at any time by the
Chairman of the Board, the President or any director. Each such meeting shall be
called by giving notice to that effect to the Secretary at least forty-eight
(48) hours before such meeting. Such notice shall state the place, date, hour
and purpose or purposes of such meeting. Promptly after receipt of such notice
and, in any event, not less than twenty-four (24) hours before such meeting, the
Secretary shall give notice of such meeting to all directors. Such notice shall
state the place, date, hour and purpose or purposes of such meeting and shall
indicate that such notices are being sent at the request of the person calling
such meetings. Except as otherwise required by the Law, each notice of each
special meeting of the Board shall be given by (i) mail addressed to a director
at his residence or usual place of business at least seven (7) days before the
date of such meeting or (ii) personal delivery or telex, telephone, telegraph,
telecopier or other electronic means addressed to a director at his usual place
of business at least twenty-four (24) hours before such meeting. If mailed, such
notice shall be deemed to have been given to a director five (5) days after it
is deposited in the United States mail, postage prepaid, directed to such
director at his residence or usual place of business.
(d) A written waiver of notice of a meeting of the Board signed by a
director, before or after such meeting, shall be deemed to be equivalent to the
giving of proper notice to such
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director of such meeting. Attendance of a director at a meeting of the Board
shall constitute a waiver of notice of such meeting, except when such director
attends such meeting for the express purpose of objecting, at the commencement
of such meeting, to the transaction of any business at such meeting because such
meeting was not lawfully called or convened. Neither the business to be
transacted at nor the purpose of any regular or special meeting of the Board is
required to be specified in any written waiver of notice of such meeting.
Section 5. Quorum; Adjournment.
The presence of a majority of the Whole Board (as defined in the
Certificate of Incorporation) at any meeting of the Board shall be required in
order to constitute a quorum for the transaction of business thereat. Any
meeting of the Board may be adjourned from time to time until the business to be
transacted at such meeting is completed. If a quorum shall not be present at any
such meeting, a majority of the directors present may adjourn such meeting to
another time and place. When a meeting of the Board is adjourned to another time
and place, it shall not be necessary to give any notice of the adjourned meeting
if the time and place to which such meeting is adjourned are announced at such
meeting. Any business may be transacted at such adjourned meeting which might
have been transacted at such meeting.
Section 6. Manner of Acting.
(a) The Board may designate a Chairman of the Board. The Chairman of
the Board shall preside at all meetings of stockholders and of the Board. He
shall perform such other duties as the Board may from time to time assign to
him. In the absence of the Chairman of the Board (including an absence because
no Chairman of the Board shall have been designated), a person designated by a
majority of the directors present at such meeting shall serve as the chairman of
such meeting. The chairman of each meeting of the Board shall call such meeting
to order, determine the order of business at such meeting and otherwise preside
over such meeting.
(b) The Secretary shall act as secretary of each meeting of the Board
and keep the minutes thereof, but, in the absence of the Secretary, the chairman
of such meeting shall appoint some other person to act as secretary of such
meeting.
(c) At each meeting of the Board each director shall be entitled to one
vote. Except as otherwise provided in the Certificate of Incorporation or these
By-Laws, a matter submitted to a vote at a meeting of the Board shall have been
approved only if a quorum was present at the time of the vote thereon and a
majority of the directors present at that time shall have voted to approve such
matter.
(d) Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting if all of the directors consent in writing
to such action and such writing or writings are filed with the minutes of
proceedings of the Board.
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Section 7. Annual Meeting of Directors.
An annual meeting of the Board for the transaction of such business as
may be properly brought before such meeting shall be held promptly following
each annual meeting of stockholders.
Section 8. Participation in Meeting by Telephone.
One or more directors may participate in a meeting of the Board by
means of conference telephone or similar communications equipment by means of
which all persons participating in such meeting can hear each other at the same
time. Participation in a meeting of the Board by such means shall constitute
presence in person at such meeting.
Section 9. Compensation and Expenses of Directors.
Directors may be compensated for rendering services as such as
determined from time to time by the Board. Directors shall be reimbursed for
expenses incurred by them in connection with rendering services as such.
ARTICLE III - COMMITTEES OF THE BOARD
Section 1. Regular Committees.
The Board may, pursuant to a resolution or resolutions adopted by an
affirmative vote of a majority of the Whole Board, designate one or more
committees of the Board. The members of each such committee shall consist of
such directors (but only such directors) as may be designated by the Board,
pursuant to a resolution or resolutions adopted by an affirmative vote of a
majority of the Whole Board. The Board may, pursuant to a resolution or
resolutions adopted by an affirmative vote of a majority of the Whole Board,
designate one or more directors as alternate members of any committee who may
replace any absent or disqualified member of any committee at any meeting of
such committee. Any vacancy on any committee resulting from death, resignation
or any other event or circumstance, which is not filled by an alternate member,
shall be filled by the Board, pursuant to a resolution or resolutions adopted by
an affirmative vote of a majority of the Whole Board. Directors elected to fill
such vacancies shall hold office for the balance of the terms of the members
whose vacancies are so filled. Each committee will report its actions in the
interim between meetings of the Board at the next meeting of the Board or as
otherwise directed by the Board.
Section 2. Regular Committee Powers.
Any committee of the Board, to the extent (but only to the extent)
provided in a resolution or resolutions adopted by the affirmative vote of a
majority of the Whole Board, (i) shall have and may exercise all of the powers
and authority of the Board and do all of the lawful acts and things which may be
done by the Board in the management of the business and affairs of the
Corporation and (ii) may authorize the seal of the Corporation to be affixed to
all papers which may require it; provided, however, that no such committee shall
have the power or
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authority to: amend the Certificate of Incorporation; adopt an agreement of
merger or consolidation; recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets;
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution of the Corporation; except as otherwise provided in the
Certificate of Incorporation, call a meeting of stockholders; amend or repeal
these By-Laws or adopt new By-Laws; or, unless the Certificate of Incorporation,
these By-Laws or resolutions adopted by the affirmative vote of a majority of
the Whole Board shall expressly so provide, declare a dividend, authorize the
issuance of shares of capital stock of the Corporation or adopt a certificate of
ownership and merger.
Section 3. Advisory Committees.
The Board or a committee of the Board may designate one or more
advisory committees to report to the Board or a committee of the Board. Each
such advisory committee shall consist of one or more individuals designated by
the Board or the committee of the Board which designated such advisory
committee. Such individuals are not required to be directors. The Board may
designate one or more individuals as alternate members of any advisory committee
who may replace any absent or disqualified member of any advisory committee at
any meeting of such committee. Any absence of any member of any advisory
committee or vacancy on any advisory committee resulting from death, resignation
or any other event or circumstance, which is not filled by an alternate member,
shall be filled only by the Board or the committee of the Board which designated
such advisory committee. Individuals elected to fill such vacancies shall hold
office for the balance of the terms of the members whose vacancies are so
filled. Each advisory committee will report its actions in the interim between
meetings of the Board or the committee of the Board which designated such
advisory committee at the next meeting of the Board or the committee of the
Board which designated such advisory committee or as otherwise directed by the
Board or the committee of the Board which designated such advisory committee. An
advisory committee shall have none of the powers or authority of the Board or
any committee of the Board.
Section 4. Procedures.
Unless otherwise expressly authorized by the Board in the resolution or
resolutions designating such committee or advisory committee, the members of
committees or advisory committees shall act only as a committee and the
individual members shall have no power as such. Any member of any committee or
advisory committee may be removed as such and any committee may be dissolved by
the Board, as set forth in a resolution or resolutions adopted by the Whole
Board at any time, except as may be provided otherwise in the resolution or
resolutions designating such committee or advisory committee. The presence, at
any meeting thereof, of a majority of the total number of members which a
committee or advisory committee would have if there were no vacancies thereon
shall be required in order to constitute a quorum for the transaction of
business at such meeting. The term of office of each member of any committee or
advisory committee shall commence at the time of his election and qualification
and shall continue until his successor shall have been duly elected or until the
dissolution of the committee or advisory committee or his earlier death,
resignation or removal. Except as otherwise provided in this Article III or in
the resolution or resolutions designating such
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committee or advisory committee and except for the reference to presiding at
meetings of stockholders in Section 6(a) of Article II hereof, Sections 4, 5, 6,
7 and 8 of Article II hereof shall apply to committees and advisory committees
and members thereof as if references therein to the Board and directors were
references to such committees and members, respectively.
ARTICLE IV - OFFICERS
Section 1. Officers.
The Board shall elect a President. The Board may elect one or more Vice
Presidents (one or more of whom may be designated as an Executive Vice President
or a Senior Vice President), a Secretary, a Treasurer and also elect or appoint,
in accordance with Section 6 of this Article IV, such other officers as it may
at any time and from time to time determine. Any or all offices may be held by
the same person. Officers many be elected at any time or from time to time.
Section 2. President.
The President shall be the chief executive of the Corporation and
shall, subject to the control of the Board, have general supervision over and
general charge for the business of the Corporation. The President shall see that
all orders of the Board are carried into effect. The President shall, generally,
perform such duties as may from time to time be assigned to him by these By-Laws
or by the Board and is authorized to enter into contracts and execute and
deliver instruments on behalf of the Corporation in the ordinary course of its
business without specific approval of the Board. The Board may elect a Chief
Executive Officer who may have the power, authority and duties of the President.
In such event, references herein to the President shall mean the Chief Executive
Officer and references to Vice President shall include the President except that
the President shall be senior to all Vice Presidents. The Chief Executive
Officer may also be elected President or another individual may be elected
President. Any such other individual shall, subject to the control of the Board,
perform all duties as may from time to time be assigned to him by the Board, the
Chief Executive Officer or these By-Laws.
Section 3. Vice Presidents.
Each Vice President shall, subject to the control of the Board, perform
all duties as may from time to time be assigned to him by the Board, the
President or these By-Laws. In case of the absence of the President, any Vice
President designated by the Board shall perform the duties of the President with
all of the powers of, and subject to all of the restrictions upon, the
President.
Section 4. Treasurer.
The Treasurer shall, subject to the control of the Board, have charge
and custody of and be responsible for all of the funds and securities of the
Corporation, keep full and accurate accounts of assets, liabilities, receipts,
disbursements and other transactions of the Corporation in books belonging to
the Corporation, cause regular audits of such books to be made and deposit all
moneys and other valuable effects in the name of and to the credit of the
Corporation in such
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banks or other depositories as may be designated by the Board. The Treasurer
shall, subject to the control of the Board, disburse the funds of the
Corporation as ordered by the Board or the other officers of the Corporation in
accordance with these By-Laws, taking proper vouchers for such disbursements,
and shall render to the President and to the Board at its meetings or whenever
he or it may require a statement of all his transactions as treasurer and an
account of the financial condition of the Corporation. In general, the Treasurer
shall, subject to the control of the Board, perform all of the duties incident
to the office of treasurer and such other duties as may from time to time be
assigned to him by the Board, the President or these By-Laws.
Section 5. Secretary.
The Secretary shall, subject to the control of the Board, act as
secretary of, and keep the minutes of, the proceedings of the Board and the
stockholders in books belonging to the Corporation, give or cause to be given
notice of all meetings of stockholders and directors as required by these
By-Laws, be custodian of the seal of the Corporation, affix the seal, or cause
it to be affixed, to all certificates for shares of capital stock of the
Corporation and to all documents the execution of which on behalf of the
Corporation under its seal shall have been specifically or generally authorized
by the Board, have charge of the stock records of the Corporation and of the
other books, records and papers of the Corporation relating to its organization
as a corporation and see that the reports, statements and other documents
required by law relating to the maintenance of the existence, qualifications and
franchises of the Corporation as a corporation are properly kept or filed. The
Secretary shall, subject to the control of the Board, generally perform all of
the duties incident to the office of secretary and such other duties as may from
time to time be assigned to him by the Board, the President or these By-Laws.
Section 6. Additional Officers and Appointed Officers.
The Board may from time to time elect such other officers (including,
without limitation, assistant officers) as the Board may deem proper, each of
whom shall hold office for such period, have such authority and perform such
duties as the Board or the President pursuant to authority delegated to him by
the Board may from time to time determine.
The President may, pursuant to authority delegated to him from time to
time by the Board, from time to time, appoint one or more officers or assistant
officers (other than Vice Presidents, the Secretary or the Treasurers) as the
President shall deem proper, each of whom shall hold office for such period,
have such authority and perform such duties as the President or other officers
pursuant to authority delegated to them by the President may from time to time
determine.
The Board and the President pursuant to authority delegated by the
Board may from time to time employ or engage such employees, agents,
consultants, representatives and advisors as the Board or the President shall
deem proper, each of whom shall be employed or engaged for such period, have
such authority and perform such duties as the Board or the President may from
time to time determine.
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Section 7. Removal.
Any officer, employee, agent, consultant, representative or advisor of
the Corporation may be removed at any time by the Board or by the President
pursuant to authority delegated to him by the Board, except that an executive
officer of the Corporation may be removed or replaced, directly or indirectly
(including, without limitation, removal or replacement effected by reason of
election and qualification of a successor, demotion, relocation, failure to
re-elect or diminution in duties or compensation), pursuant to (but only
pursuant to) a resolution or resolutions adopted by the affirmative vote of a
majority of the Whole Board (excluding, if such officer is also a director, such
director). For this purpose, an executive officer means the President or a Vice
President.
Section 8. Resignations.
Any officer may resign from his office at any time by giving written
notice of his resignation to the Board, the President or the Secretary. The
resignation of any officer shall take effect at the time of receipt of such
notice by the Board, the President or the Secretary, as the case may be, or at
any later time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. No
such resignation shall affect any rights which the Corporation may have under
any agreement with such officer.
Section 9. Giving of Bond by Officers.
All officers of the Corporation, if required to do so by the Board,
shall furnish bonds to the Corporation for the faithful performance of their
duties subject to such penalties and with such conditions and security as the
Board may from time to time require. All expenses of any such bond shall be paid
by the Corporation.
Section 10. Compensation of Officers.
Compensation of officers of the Corporation may be fixed from time to
time by the Board or, in the case of officers other than the President, by the
President pursuant to authority delegated to him by the Board.
Section 11. Term of Office.
Subject to Section 7 of this Article IV, the term of office of each
officer shall commence at the time of his election and qualification and shall
continue until his successor shall have been duly elected and qualified or his
earlier death, resignation or removal.
Section 12. Voting Stock Held by Corporation.
Except as otherwise determined from time to time by the Board, the
President shall have full power and authority in the name and on behalf of the
Corporation to attend, act and vote at any meeting of stockholders, partners or
owners of any corporation, partnership or other entity in which the Corporation
may hold stock, a partnership interest or another ownership interest and at
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any such meeting shall possess and may exercise any and all rights and powers
incident to the ownership of such stock or interest which, as the owner thereof,
the Corporation might have possessed and exercised. The Board may from time to
time confer like powers upon any other person or persons and the President may
delegate his powers hereunder to any other officer of the Corporation.
ARTICLE V - INDEMNIFICATION
Section 1. Indemnification.
(a) Each person who is or was made a party or is threatened to be made
a party to, or is or was involved in, any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding"), by reason of
the fact that he, or a person of whom he is the legal representative, is or was
a director, officer, employee or, pursuant to a resolution or resolutions
adopted by the affirmative vote of a majority of the Board, agent of the
Corporation or a subsidiary of the Corporation or is or was serving at the
request of the Corporation as a director, officer, partner, member, employee,
agent or trustee of another corporation (other than a subsidiary of the
Corporation) or of a partnership, joint venture, trust or other enterprise,
including an employee benefit plan, whether the basis of such proceeding is
alleged action in an official capacity as an officer or director or in any other
capacity while so serving, shall be indemnified by the Corporation for and held
harmless by the Corporation from and against, to the fullest extent authorized
by the Law, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader or greater rights to indemnification than the Law
prior to such amendment permitted the Corporation to provide), all expenses,
liabilities and losses (including attorneys' fees, judgments, fines, excise
taxes, penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith; provided, however,
that except as provided herein with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board. Such right to indemnification shall continue as to a
person who has ceased to be such an officer, director, partner, member,
employee, agent or trustee and shall inure to the benefit of his or her heirs,
executors and administrators. Such right to indemnification shall be a contract
right and shall include the right of a director, officer, partner, member,
employee, agent or trustee to be paid the expenses (including costs and
attorneys' fees and disbursements) incurred in defending a proceeding in advance
of its final disposition to the fullest extent authorized by the Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader or greater rights to indemnification than the Law prior to such
amendment permitted the Corporation to provide); provided, however, that, if the
Law requires, the payment of such expenses incurred by a director or officer of
the Corporation in his capacity as a director or officer of the Corporation (and
not in any other capacity in which service was or is rendered by such person
while a director or officer of the Corporation, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it
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shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Article or otherwise. Such right to indemnification
and to the payment of expenses may be granted to any other employee or agent of
the Corporation or its subsidiaries if, and to the extent, authorized by the
Board.
(b) If a claim under this Article is not paid in full by the
Corporation within thirty (30) days after a written demand therefor has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting such suit. It shall be a defense to any such suit
(other than a suit brought to enforce a claim for expenses incurred in defending
a proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including the Board, independent legal counsel to the Corporation
or the stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Law nor an actual determination by the Corporation (including the Board,
independent legal counsel to the Corporation or the stockholders) that the
claimant has not met such applicable standard of conduct shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 2. Indemnification Not Exclusive.
The indemnification of or the payment of expenses for any person under
this Article, or the right of any person to indemnification or payment of
expenses under this Article, shall not limit or restrict in any way the power of
the Corporation to indemnify or pay expenses for such person in any other manner
permitted by law or be deemed exclusive of, or invalidate, any other right which
such person may have or acquire under any law, agreement, vote of stockholders
or disinterested directors, or otherwise.
Section 3. Successors.
The right of any person to indemnification and payment of expenses
under this Article shall continue as to a person after such person shall have
ceased to be such an officer, director, partner, member, employee, agent or
trustee, shall inure to the benefit of the heirs, distributees, executors,
administrators and other legal representatives of such person, shall survive and
not be adversely affected by any modification or repeal of this Article with
respect to any claim or proceeding which arose or transaction, matter, event or
condition which occurred or existed before such modification or repeal and shall
be binding upon all successors of the Corporation.
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Section 4. Insurance.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was such an officer, director, partner, member, employee, agent
or trustee against any liability asserted against such person as such an
officer, director, partner, member, employee, agent or trustee or arising out of
such person's status as such an officer, director, partner, member, employee,
agent or trustee, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article or applicable law.
Section 5. Definition of Certain Terms.
(a) For purposes of this Article, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall include any
service as a director, officer, fiduciary, employee or agent of the Corporation
which imposes duties on, or involves services by, such director, officer,
fiduciary, employee or agent with respect to an employee benefit plan, its
participants or its beneficiaries.
(b) For the purposes of this Article and the Law, a person who acted in
good faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interest of the
Corporation."
ARTICLE VI - CONTRACTS; BANK ACCOUNTS
Section 1. Execution of Contracts.
Except as provided otherwise in these By-Laws, the Board may from time
to time authorize any officer, employee, agent or representative of the
Corporation, in the name and on behalf of the Corporation, to enter into any
contract or execute and deliver any instrument. Such authorization may be
general or confined to specific instances. Unless so authorized by the Board or
these By-Laws, no officer, employee, agent or representative shall have any
power or authority to bind the Corporation by any contract or engagement, to
pledge its credit or to render it pecuniarily liable for any purpose or to any
amount.
Section 2. Checks; Drafts; Notes.
All checks, drafts and other orders for the payment of moneys out of
the funds of the Corporation and all notes or other evidences of indebtedness of
the Corporation shall be signed in the name and on behalf of the Corporation in
the manner authorized from time to time by the Board.
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Section 3. Deposits.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in the banks, trust companies
or other depositories selected from time to time by the Board or by an officer,
employee, agent or representative of the Corporation to whom such authority may
from time to time be delegated by the Board. For the purpose of making such a
deposit, any officer, employee, agent or representative to whom authority to
make such a deposit is delegated by the Board may endorse, assign and deliver
checks, drafts and other orders for the payment of moneys which are payable to
the order of the Corporation.
ARTICLE VII - SHARES; DIVIDENDS
Section 1. Certificates.
Every holder of record of a share or shares of capital stock of the
Corporation then outstanding shall be entitled to a duly signed certificate in
proper form certifying that he is the record holder of such share or shares.
Certificates for shares of capital stock and other securities of the Corporation
shall be issued in such forms as the Board may prescribe. Such certificates
shall be signed by the Chairman of the Board, the President or a Vice President
and by the Secretary or the Treasurer. The seal of the Corporation or a
facsimile thereof shall be affixed on such certificates, and such certificates
shall be countersigned and registered in such manner, if any, as the Board may
prescribe. The signatures of the officers upon such certificates may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon any certificate shall have ceased
to be such an officer, transfer agent or registrar before such certificate is
issued, such certificate may be issued with the same effect as if he were such
officer, transfer agent or registrar on the date of issuance of such
certificate.
Section 2. Transfers.
Transfers of shares of capital stock of the Corporation shall be made
on the records of the Corporation only upon authorization by the record holder
of such shares, in person or by his duly authorized attorney or legal
representative, upon surrender and cancellation of certificates therefor duly
endorsed or accompanied by duly executed stock powers (with such proof of
authenticity of signature as the Corporation or its agent may require) for a
like number of shares, upon payment of all taxes thereon and upon compliance
with any restrictions on transfer thereof. For so long as the Stockholders
Agreement is in effect, any purported transfer shall be subject to the
limitations set forth in Section 2.3 of the Stockholders Agreement. The person
in whose name shares of capital stock of the Corporation stand on the records of
the Corporation shall be deemed the owner of such shares for all purposes as
regards the Corporation. The Board may make such additional rules and
regulations and take such action as it may deem expedient, not inconsistent with
the Certificate of Incorporation and these By-Laws, concerning the issue,
transfer and registration of certificates or the issue of certificates in lieu
of certificates claimed to have been lost, destroyed, stolen or mutilated.
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Section 3. Lost or Destroyed Certificates.
The Corporation may issue a new certificate for shares of capital stock
of the Corporation in order to replace any certificate theretofore issued by it
alleged to have been lost, stolen or destroyed, and the Corporation may require
the holder of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Corporation a bond or other security to indemnify
it against all losses, liabilities and expenses (including attorney's fees and
expenses) incurred in connection with investigating, defending and settling any
claim that may be made against it on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate.
Section 4. Fractions of a Share.
The Corporation shall have the authority to issue (but shall not be
obligated, under these By-Laws, to issue) fractions of a share of any class or
series of capital stock of the Corporation. In lieu of issuing a fraction of a
share of any class or series of capital stock of the Corporation, the
Corporation may (i) make such payments as may be determined using such equitable
method as the officer of the Corporation may select and/or (ii) issue that
number of whole shares of such class or series of capital stock of the
Corporation as may be determined using such equitable method for rounding
fractions to integers as the officers of the Corporation may select, as the
Board may determine or the Certificate of Incorporation may require.
Section 5. Dividends.
Subject to the provisions of the Certificate of Incorporation and to
the extent permitted by the Law, the Board may declare dividends on shares of
any class or series of capital stock of the Corporation at such times and in
such amounts as, in its opinion, the conditions of the business of the
Corporation render advisable. Before payment of any dividend or making any
distribution of profits, the Board may set aside out of the surplus or net
profits of the Corporation such sum or sums as the Board may from time to time,
in its absolute discretion, deem proper as a reserve fund to meet contingencies
or for equalizing dividends, for repairing or maintaining any property of the
Corporation or for such other purposes as the Board may from time to time deem
to be in the best interests of the Corporation.
ARTICLE VIII - CORPORATE SEAL
The Board may adopt a corporate seal of the Corporation which shall be
in such form as the Board may from time to time determine. When authorized by
these By-Laws or by the Board, a facsimile of the corporate seal may be affixed
in lieu of the corporate seal.
ARTICLE IX - FISCAL YEAR
The fiscal year of the Corporation shall be fixed from time to time by
the Board.
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ARTICLE X - AMENDMENTS
These By-Laws, in whole or in part, may be amended or repealed and new
By-Laws, in whole or in part, may be adopted as (but only as) provided in the
Certificate of Incorporation.
* * *
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<PAGE> 1
Exhibit 10.1
TRANSFER AGREEMENT
BETWEEN
UCAR CARBON COMPANY INC.
TRANSFEROR
AND
UCAR GRAPH-TECH INC.
TRANSFEREE
JANUARY 1, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. TRANSFER OF ASSETS AND SHARES
AND ASSUMPTION OF LIABILITIES 2
1.1 Transfer of Assets 2
1.2 Excluded Assets 4
1.3 Other Transactions 5
1.4 Assignment of Assets 5
1.5 Obtaining Permits and Licenses 7
ARTICLE 2. CAPITALIZATION AND PAYMENT 8
2.1 Capitalization 9
2.2 Valuation 9
ARTICLE 3. LIABILITIES, OBLIGATIONS, AND
INDEMNITIES 9
3.1 Liabilities of Transferor and Indemnification 9
3.2 Liabilities of Transferee and Indemnification 11
3.3 Indemnification Procedure 13
ARTICLE 4. EMPLOYEES 15
4.1 Employment and Benefits 15
4.2 Employees 15
ARTICLE 5. CLOSING 16
5.1 Closing 16
5.2 Transferor's Obligations and Closing Deliveries 16
5.3 Transferee's Obligations and Closing Deliveries 17
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
5.4 Recording of Documents 18
ARTICLE 6. MONETARY ADJUSTMENTS AND
POST CLOSING OBLIGATIONS 18
6.1 Taxes and Other Expenses 18
6.2 Further Assurances 20
6.3 Records Retained by Transferor 20
6.4 Access to Records by Transferor 21
6.5 Preservation of Records 21
6.6 Use of Trademarks and Transferor's Name 22
ARTICLE 7. BULK SALES LAW 22
ARTICLE 8. PUBLICITY; CONFIDENTIALITY 22
8.1 Publicity 22
8.2 Confidentiality 23
ARTICLE 9. NOTICES 23
ARTICLE 10. MISCELLANEOUS 24
10.1 Binding Effect; Assignment 24
10.2 Schedules 24
10.3 Counterparts 25
10.4 Article Headings 25
10.5 Waiver 25
10.6 Severability 26
10.7 Governing Law and Forum 26
10.8 Entire Agreement 26
</TABLE>
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SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
A MACHINERY AND EQUIPMENT 28
B PATENTS 43
C TECHNOLOGY CONTRACTS 84
D TRADEMARKS 96
E CONTRACTS 131
F PERMITS 134
G CLAIMS, SUITS, AND PROCEEDINGS 136
H LIABILITIES AND EXCLUDED LIABILITIES 137
I EMPLOYEES AND EMPLOYEE BENEFIT PLANS 138
</TABLE>
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TRANSFER AGREEMENT
AGREEMENT, made as of the 1st day of January, 2000, by and between UCAR
Carbon Company Inc., its subsidiaries and affiliates, a Delaware corporation
with offices at 3102 West End Avenue, Nashville, Tennessee, 37203
("Transferor"), and UCAR Graph-Tech Inc., Delaware corporation with offices at
11709 Madison Avenue, Lakewood, OH 44107 (Transferee),
W I T N E S S E T H :
WHEREAS, Transferor has and is engaged in the worldwide natural,
acid-treated and flexible graphite businesses, including, but not limited to the
development, production, manufacture, marketing use, sale, distribution and
servicing, throughout the world, of natural, acid-treated and flexible graphite
products and related products made with natural graphite; as well as equipment
used for the above-mentioned functions (the "Business") and
WHEREAS, Transferee wishes to acquire, and Transferor is willing to
transfer, assign and convey, or cause to be transferred, assigned and conveyed,
all of its right, title, and interest in the Business including the assets held
directly by Transferor ;and
WHEREAS, Transferor intends to implement this transfer in order to give
the Business greater flexibility and authority to respond to changing markets
and to give the Transferee full accountability for financial and day-to-day
operating performance; and
WHEREAS, Transferor intends to transfer the Business to Transferee as a
contribution to capital and Transferee intends to assume the liabilities of the
Business in accord with Sections 351(a) and 357(b) of the Internal Revenue Code
of 1986; and
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NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereby agree as follows:
ARTICLE 1 - TRANSFER OF ASSETS AND SHARES
1.1 Transfer of Assets. Subject to the terms and conditions of this Agreement,
and except as otherwise provided in the Schedules and in Articles 1.2 and 1.5
hereof, at the Closing (as defined in Article 5 hereof), Transferor shall
assign, transfer, convey and deliver to Transferee, and Transferee shall acquire
and accept, or cause to be acquired and accepted, from Transferor all of
Transferor's right, title and interest in and to all of the following assets
(the "Assets"):
(i) all fixtures, furnishings, furniture, office equipment and supplies,
vehicles, tools, machinery and equipment, and other tangible personal
property, including construction in progress (the "Machinery and
Equipment") associated with the Business and more fully described in
Schedule A;
(ii) all quantities of inventory, including raw materials,
work-in-progress, finished goods, consigned inventories, stores and
supplies (the "Inventory") as set forth on the balance sheet of the
Business as of January 1, 2000.;
(iii) all patents, patent applications listed in Schedule B attached
hereto (the "Patents"); all technical information, know-how and trade
secrets in any physical form, including, but not limited to all notebooks,
records,
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reports, data, documents, drawings, specifications, manuals, memoranda and
computer programs developed, licensed or otherwise acquired by Transferor
and used exclusively in the Business (the "Technology"); and all
technology contracts including patent licenses associated with the
Business and including, without limitation, those listed in Schedule C
attached hereto (the "Technology Contracts");
(iv) all trademarks, trade names and service marks, registrations and
applications therefor, and trademark license agreements associated with
the Business including, without limitation, those listed in Schedule D
attached hereto (the "Trademarks"); all copyrights, and registrations and
applications associated with the Business (the "Copyrights");
(v) all contracts (other than Technology Contracts), agreements,
arrangements and/or commitments of any kind, to which Transferor is a
party and which relate exclusively to the Business or Assets, including,
without limitation, those contracts listed in Schedule E attached hereto
(the "Contracts");
(vi) all regulatory licenses, permits, exemptions and approvals to which
Transferor is a party and which relate exclusively to the Business or
Assets, including, without limitation, those permits listed in Schedule F
attached hereto (the "Permits")'
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(vii) all accounts receivable of Transferor of any nature whatsoever,
whether recorded or unrecorded, and including without limitation accounts
receivable from third parties, including employees and affiliates, and
inter-division receivables, which relate exclusively to the Business or
Assets as shown on the balance sheet of the Business as of January 1,
2000, (the "Accounts Receivable");
(viii) all customer and vendor lists relating to the Business, all files
and documents (including credit information) relating exclusively to
customers and vendors of the Business; and other business and financial
records, files, books and documents relating exclusively to the Assets or
the Business; and
(ix) all claims, suits and proceedings by the Business, if any, including
those claims listed on Schedule G attached hereto (the "Claims").
1.2 Excluded Assets. The parties to this Agreement expressly understand and
agree that Transferor is not assigning, transferring or conveying to Transferee
any assets, rights or properties of Transferor not specifically referred to in
Articles 1.1 and 1.3. Without limiting the foregoing, the following assets,
rights and properties of Transferor (the "Excluded Assets") shall be
specifically excluded from the transactions contemplated in this Agreement:
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(i) cash, certificate of deposit, and other cash equivalents;
(ii) pension or other funded employee benefit plan assets;
(iii) except as otherwise expressly provided herein, assets and
properties reflected in the books and records of Transferor as the
property of any division or department other than its Natural and
Flexible Graphite Division;
(iv) the capital stock owned or held by Transferor in any subsidiary
or affiliate of Transferor.
1.3 Other Transactions. In addition to the transactions contemplated above, the
following acts or transactions shall also occur on or before the Closing;
(a) Transferee and Transferor shall execute and deliver license or
non-assertion agreements, in a form reasonably acceptable to Transferee
and Transferor, permitting Transferee to continue to use in the Business
certain patents, technology, trademarks and tradenames of Transferor not
exclusive to the business of the other "the "Non-Assertion of Proprietary
Rights Agreement");
(b) Transferee and Transferor shall execute and deliver all service
agreements necessary for the continued operation of the Business, in a
form reasonably acceptable to Transferee and Transferor (the "Service
Agreements");
(c) Transferee and Transferor shall execute and deliver a Tax Allocation
Agreement, in a form reasonably acceptable to Transferee and
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Transferor, to provide for Transferee's payment of its appropriate share
of federal and state income taxes, including the funding of estimated tax
payments as required (the "Tax Allocation Agreement");
1.4 Assignment of Assets.
(a) Non-assignability. To the extent that any lease, contract, license,
agreement, sales or purchase order, commitment, property interest,
qualification or other asset described in Article 1.1 to be assigned,
transferred or conveyed to Transferee, or any claim, right or benefit
arising thereunder or resulting therefrom (collectively the "Interests"),
is not capable of being assigned, transferred or conveyed without the
approval, consent or waiver of the issuer thereof or the other party
thereto, or any third person (including a government or governmental unit)
or if such assignment, transfer or conveyance or attempted assignment,
transfer or conveyance would constitute a breach thereof or a violation of
any law, decree, order, regulation or other governmental edict, or is not
practicable because it relates to matters involving the Business or Assets
together with other enterprises or assets of Transferor not being
transferred to Transferee, or with respect to Assets outside the United
States because Transferee does not have a subsidiary of affiliate in the
country in which such Assets are located, this Agreement shall not
constitute an assignment, transfer or conveyance thereof, or an attempted
assignment, transfer or conveyance thereof, until such obstacles have been
removed.
(b) Transferor to Use Reasonable Efforts. Anything in this Agreement to
the
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contrary notwithstanding, Transferor is not obligated to, assign, transfer
or convey to Transferee any of its rights and obligations in and to any of
the Interests without first obtaining all necessary approvals, consents or
waivers. Transferor shall use all reasonable efforts, and Transferee shall
cooperate with Transferor, to obtain all necessary approvals, consents or
waivers, or to resolve any impracticabilities of transfer referred to in
Article 1.5(a), necessary to convey to Transferee each such Interest as
soon as practicable; provided, however, that neither the Transferor, nor
Transferee, shall be obligated to pay any consideration therefor (except
for filing fees and other ordinary administrative charges which shall be
paid by Transferee) to the third party from whom such approval, consent or
waiver is requested.
(c) If Waivers of Consents Cannot be Obtained. To the extent any of the
approvals, consents or waivers referred to in Article 1.5(b) have not been
obtained as of the Closing, or until the impracticabilities of transfer
referred to in Article 1.5(a) are resolved, Transferor shall, during the
remaining term of such Interest, use all reasonable efforts, with
reasonable costs of Transferor related thereto to be promptly reimbursed
by Transferee, to (i) obtain the consent of any such third party; (ii)
cooperate with Transferee in any reasonable and lawful arrangements
designed to provide the benefits of such Interest to Transferee so long as
Transferee fully cooperates with Transferor in such arrangements; and
(iii) enforce, at the request of Transferee and at the expense and for the
account of Transferee, any rights of Transferor arising from such Interest
against such issuer
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thereof or the other party or parties thereto (including the right to
elect to terminate any such Interest in accordance with the terms thereof
upon the advice of Transferee).
1.5 Obtaining Permits and Licenses. Transferee shall obtain, as of the Closing
or as soon thereafter as practicable, all Permits required by any governmental
agency with respect to the Assets or the Business (including without limitation
environmental and other operating permits), without any guaranty or liability of
Transferor with respect thereto; provided, however, that Transferor will assign,
transfer and convey to Transferee at the Closing those permits, licenses,
exemptions and approvals described in Schedule F which are held or used by
Transferor exclusively in connection with the Business and can be assigned
without having to obtain the consent of any third party with respect thereto,
and provided, further, that Transferor will cooperate with Transferee in
obtaining any third party consents necessary to the assignment or transfer of
any other permits or licenses used or held by Transferor exclusively in
connection with the Business which are so assignable or transferable. Subsequent
to Closing, to the extent permitted by law, Transferor shall have the right to
cancel any permits, licenses, exemptions, approvals, bonds, guarantees or
undertakings by Transferor now applicable to the Assets or the Business to the
extent such is not so assigned or transferred to Transferee pursuant to this
Article 1.6; provided, however, that Transferor agrees to maintain at
Transferee's expense any such permits, licenses, exemptions, approvals, bonds,
guarantees undertakings for up to six (6) months after Closing or until expired,
which occurs first, so long as Transferee diligently exerts all reasonable
efforts to obtain the necessary consents
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of third parties for such assignment or transfer to Transferee or new permits,
bonds, guarantees or undertakings prior to that time, whichever is applicable.
The failure of Transferor to cancel any permits, licenses, bonds, guarantees or
undertakings shall not affect the respective rights, obligations, liabilities
and indemnifications of Transferor by Transferee under this Agreement.
Transferee shall assume, or reimburse Transferor for, all costs associated with
assignments or transfer of permits and licenses and the cost of any bonds which
cannot be cancelled for as long as they remain outstanding.
ARTICLE 2 - CAPITALIZATION AND VALUATION
2.1 Capitalization. Transferor's subsidiary, UCAR Carbon Technology Corporation,
is the sole stockholder of Transferee, holds one hundred (100) shares of
Transferee's voting common stock, $1.00 par value, which shares are fully paid
and non-assessable and which constitute all the issued and outstanding shares of
Transferee capital stock. All of the issued and outstanding shares of
Transferee's capital stock shall be transferred to Transferor on December 31,
1999. The transfer of the Assets shall be an additional contribution to capital.
2.2 Valuation. The parties agree that, for book and financial reporting
purposes, the value of the Assets transferred to Transferee hereinunder shall be
deemed to be the sum, as of the date of the Closing, of the aggregate net book
value of all Assets.
ARTICLE 3 - LIABILITIES, OBLIGATION AND INDEMNITIES
3.1 Liabilities of Transferor and Indemnification. Transferor shall indemnify
and hold harmless Transferee, its successors and assigns from and against any
and all
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damages, claims, losses, liabilities and expenses (excluding legal, accounting
and similar expenses), which may arise out of (i) any violation of this
Agreement by Transferor, (ii) any past or present business or activity of
Transferor not part of or related to the Business and (iii) any Excluded
Liability. In case any event shall occur which would otherwise entitle
Transferee to assert a claim for indemnification hereunder, no loss, damage or
expense shall be deemed to have been sustained by Transferee to the extent of
any proceeds received by Transferee or any of its affiliates from any third
party insurance policy (which are non-reimbursable by Transferee or any of its
affiliates pursuant to any self-insurance program of Transferee) with respect
thereto, to which policies the parties agree to resort prior to making a claim
hereunder.
3.2 Liabilities of Transferee and Indemnification.
(a) Upon, from and after the Closing, Transferee shall, without any
further responsibility or liability of, or recourse to, the Transferor, or
any direct or indirect subsidiary of the Transferor (other than the
Transferee or any of their directors, shareholders, officers, employees,
agents, consultants, representatives, successors, transferees or
assignees, absolutely and irrevocably assume and be solely liable and
responsible for any and all claims, liabilities, obligations, losses,
costs, expenses, litigation, proceedings, fines, taxes, levies, imposts,
duties, deficiencies, assessments, charges, penalties, allegations,
demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements or
judgements of any kind or nature
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whatsoever, excluding only the Excluded Liabilities (as hereinafter
defined), that are asserted against, or that are or are alleged to be
related to, arising from, or associated with the ownership, use,
possession, operation or conduct of the Business before or after the
Closing (all or which are hereinafter collectively called the
"Liabilities"), regardless of when such Liabilities arose or arise, or
whether the facts on which they are based occurred prior to or subsequent
to the Closing, and regardless of where or against whom asserted or
determined or whether asserted or determined prior or subsequent to the
Closing, and regardless of whether referred to or provided for in the
balance sheet of the Business as of January 1, 2000 and regardless of
whether or not known or unknown, fixed of contingent, asserted or
unasserted, or whether arising from or alleged to arise from negligence,
recklessness, violation of law, representation or misrepresentation by
Transferor, or their directors, officers, employees, agents, subsidiaries
or affiliates, including without limitation any and all Liabilities with
respect to environment, health, safety, personal injury, property damage,
employment, claims arising out of contracts, product liability, warranty,
merchantability or fitness for any particular purpose of goods, conformity
of goods to contractual requirements, or any other alleged or actual
breach or violation of any obligation of our requirement binding on the
Transferor, the Business or the Assets. Transferee shall irrevocably
indemnify and hold harmless Transferor, the direct or indirect
subsidiaries of Transferor (other than the Transferee and its respective
directors, shareholders, officers, employees, agents, consultants,
representatives, successors,
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transferees and assigns from and against any and all Liabilities
(including without limitation reasonable fees and expenses of counsel) of
whatever kind and nature. "Excluded Liabilities" shall mean: (i)
liabilities with respect to which, but only to the extent that, Transferor
has an obligation of indemnification pursuant to Article 3.1; (ii)
liabilities with respect to which, but only to the extent that, any
proceeds are received by Transferor, or by any of its subsidiaries, from
any third party insurance policy (and are non-reimbursable by Transferor
or any of its subsidiaries pursuant to Transferor's self-insurance
program), to which policies the parties agree to resort prior to making a
claim hereunder; (iii) those tax liabilities for which Transferor is
responsible under Article 6.1 and (iv) those other liabilities listed in
Schedule H attached hereto.
(b) Transferee shall assume all debt, obligations and liabilities of
Transferor listed on the balance sheet of the Business as of January 1,
2000.
(c) Transferee shall indemnify and hold harmless Transferor and its
successors and assigns from and against any and all damages, claims,
losses, liabilities and expenses (excluding legal, accounting and similar
expenses), which may arise out of any violation of this Agreement by
Transferee.
3.3 Indemnification Procedure. (a) The party entitled to indemnification (the
"Indemnitee") shall promptly notify the party liable for such indemnification
(the "Indemnitor") in writing upon obtaining knowledge of any damage, claim,
loss, liability or expense which the Indemnitee has determined has given or
could give rise to a claim
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under Articles 3.1 or 3.2 hereof (such written notice being hereinafter referred
to as a "Notice of Claim"). A Notice of Claim shall specify in reasonable detail
the nature and any particulars or any such claim giving rise to a right of
indemnification. The Indemnitor shall satisfy its obligations under Articles 3.1
or 3.2, as the case may be, within thirty (30) days of its receipt of a Notice
of Claim; provided, however, that so long as the Indemnitor is in good faith
defending a claim pursuant to paragraph (b) below, its obligation to indemnify
the Indemnitee with respect thereto shall be suspended.
(b) With respect to any third party claim, demand, suit or action which is the
subject of a Notice of Claim, the Indemnitor shall, in good faith and at its own
expense, defend, contest, or otherwise protect against any such claim, demand,
suit or action with legal counsel of its own selection. The Indemnitee shall
have the right, but not the obligation, to participate, at its own expense, in
the defense thereof through counsel of its own choice and shall have the right,
but not the obligation, to assert any and all crossclaims or counterclaims it
may have. So long as the Indemnitor is defending in good faith any such third
party claim, demand, suit or action, the Indemnitee shall at all times cooperate
in all reasonable ways with, make its relevant files and records available for
inspection and copying by, and make its employees available or otherwise render
reasonable assistance to, the Indemnitor. In the event that the Indemnitor fails
to timely defend, contest or otherwise protect against any such third party
claim, demand, suit or action, the Indemnitee shall have the right, but not the
obligation, to defend, contest, assert crossclaims or counterclaims, or
otherwise protect against, the same and may make any compromise or settlement
thereof and recover and be indemnified for the entire cost
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thereof from the Indemnitor, including, without limitation, legal expenses,
disbursements, and all amounts paid as a result of such third party claim,
demand, suit or action or any compromise or settlement thereof.
(c) Transferor has the right, at its own expense, to participate in the defense
of all actions, claims, suits or cases assumed by Transferee pursuant to this
Agreement or which arise subsequent to the Closing involving pre-Closing
activities of the Business. Without the written consent of Transferor,
Transferee may not settle any such action, claim, suit or case. In the event
Transferor does not consent to a settlement, Transferor will assume the defense
of such action, claim, suit or case for its own account whereupon Transferee
shall be released from any further liability with respect to such action, claim,
suit or case. Transferor may, at anytime and at its sole discretion, decide to
assume the defense of such action, claim, suit or case for its own account
whereupon Transferee shall be released from any further liability with respect
to such action, claim, suit or case.
ARTICLE 4 EMPLOYEES
4.1 Employment and Benefits. Transferee will accept the transfer of employment
of all the employees of Transferor associated with the Business and located at
Transferor's Lakewood, Ohio facility and those identified in the Parma, Ohio
facility as set forth on Schedule I attached hereto with such changes, deletions
or additions thereto as may occur from the date thereof to the Closing in the
ordinary course of business and consistent with the terms and conditions of this
Agreement (the "Employees"). Any Employees subject to a legal impediment to
transfer will be seconded by the Transferor to Transferee at cost, and will be
transferred at the expiration or removal of such legal
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impediment. Effective as of the Closing and until such time as the Board of
Directors of the Transferee may determine otherwise, all Employees and other
employees of Transferee shall participate in the Retirement Program Plan for
Employees of UCAR Carbon Company and its Participating Subsidiary Companies, the
Savings Plan for Employees of UCAR Carbon Company and Participating Subsidiary
Companies, as well as those other benefit plans identified in Schedule I hereto
for so long as Transferee is a subsidiary of Transferor or its assigns and
provided Transferor or its assigns continue to maintain such plan or plans.
4.2 Employment Contracts. Transferor represents that there are no agreements
with labor unions or associations representing employees or labor agreements
connected with the Business. Effective as of Closing, Transferee will assume all
employment and consulting agreements and contracts in lieu of Transferor.
Neither Transferor nor any of the Subsidiaries has made any commitment or
agreement to increase the wages, or to modify the conditions or terms of
employment, of the Employees (as defined in Article 4.1).
ARTICLE 5 - CLOSING
5.1 Closing. The closing of the transactions contemplated under this Agreement
shall take place at the offices of Transferor located at 3102 West End Avenue,
Nashville, Tennessee 37203, on December 31, 1999, or at such time and place as
Transferee and Transferor may mutually agree in writing and shall be deemed
effective as of 12:01 A.M. on January 1, 2000 (such time being referred to
herein as the "Closing"); provided,
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however, that the time of the Closing shall be extended at the request of either
Transferee or Transferor. The parties agree that, if the Closing does not take
place on January 1, 2000, Transferor will operate the Business for the benefit
and at the risk of the Transferee and that the Transferee shall have assumed all
of the benefits and burdens of ownership during the period from and including
January 1, 2000 through and including the actual day of Closing. In all events
January 1, 2000 will be the effective and deemed Closing, and for all purposes
of this Agreement all references to the Closing shall mean January 1, 2000.
5.2 Transferor's Obligations and Closing Deliveries. At the Closing, Transferor
shall deliver or cause to be delivered, to Transferee:
(a) One executed and acknowledged Lease Agreement for the real property
and building located in Lakewood, Ohio, also and more commonly known
as Factory "A".
(b) All necessary Patent and Patent Application Assignments
(c) One executed and acknowledged Assignment with respect to the
Technology (as defined in Article 1.1) owned by Transferor.
(d) One executed Assignment and Assumption with respect to the
Technology Contracts between Transferor and third parties,
identified in Schedule C.
(e) All necessary Trademark and Trademark License Assignments.
(f) One executed and acknowledged Assignment with respect to the
copyrights.
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(g) All necessary Assignment and Assumption Agreements or novation
agreements with respect to each of the Contracts requiring same in
Schedule E;
(h) Any necessary consents, assignments or transfers required to
transfer the Permits and any other interests of Transferor as
identified in Schedule F;
(i) One certified copy of the resolutions of Transferor's Board of
Directors evidencing the authorizations for this transaction;
(j) Executed copies of the Service Agreements;
(k) One executed Tax Allocation Agreement;
(l) One Employee Benefits, Service and Liabilities Agreement; and
(m) One Non-Assertion Agreement.
5.3 Transferee's Obligations and Closing Deliveries. At the Closing, Transferee
shall deliver, or cause to be delivered, to Transferor:
(a) One fully executed copy of each Assignment, Assignment and
Assumption and Non-Assertion Agreements with respect to the Assets
previously delivered by Transferor;
(b) One executed copy of each document of assignment or transfer
required of Transferee with respect to the permits and licenses;
(c) One certified copy of the resolutions of Transferee's Board of
Directors evidencing the authorizations for this transaction;
(d) Executed copies of the Service Agreements;
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(e) One executed Tax Allocation Agreement; and
(f) One Employee Benefits, Service and Liabilities Agreement.
5.4 Recording of Documents. Transferee shall be responsible, at Transferee's
expense, for the filing or recording of such deeds, assignments, instruments or
documents delivered by Transferor hereunder, and for the preparation and
recording of such additional assignments, instruments or documents as may be
necessary or appropriate to perfect Transferee's title to or interest in the
Assets.
ARTICLE 6 - MONETARY ADJUSTMENTS AND POST CLOSING OBLIGATIONS
6.1 Taxes and Other Expenses.
(a) Transferee is responsible for any taxes (including, without
limitation, income, payroll, real and personal property, gross receipts, sales,
use, franchise, and stamp taxes) imposed by any Federal, state or local
government or other tax authority in the U.S., or by any foreign government or
any subdivision or taxing authority thereof, and other fees or charges
(including, without limitation, rents, general and special assessments, street
surfacing and other municipal charges, and fuel, water, sewer, electrical and
other utility charges, and documentation, licenses and registration fees),
together with any interest or penalties thereon ("Taxes and Other Charges"),
which are attributable to operation of the Business or to operation and
ownership of the Assets for periods following the Closing. If Transferor shall
have paid any Taxes or Other Charges for which Transferee is responsible as
aforesaid, appropriate adjustment will be made at
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the Closing if possible or as promptly as practicable thereafter.
(b) Transferee shall be liable for all sales, use, transfer, conveyance,
bulk transfer, business and occupation, value added or gross income taxes, or
other taxes, duties, excises or governmental charges (except those on or
measured by Transferor's net income) (the foregoing are hereinafter referred to
as "Transactional Taxes") imposed by any taxing jurisdiction with respect to the
transfer, or assignment of the Assets or otherwise on account of this Agreement
or the transactions contemplated herein. Transferee shall provide Transferor
with appropriate exemption certificates or direct pay certificates where
possible, or shall promptly pay and discharge any such Transactional Taxes. The
foregoing notwithstanding, in the event Transferor shall be required to pay any
Transactional Taxes, Transferee shall promptly reimburse Transferor for any
Transactional Taxes paid by Transferor on behalf of Transferee. In the event any
taxing jurisdiction subsequently determines that any additional Transactional
Taxes (including interest or penalties thereon) shall be due, Transferee shall
indemnify and hold Transferor harmless therefrom pursuant to Article 3.2.
(c) Transferor and Transferee shall cooperate regarding the filing or any
tax returns (including Federal, state, local and foreign income and other tax
returns) that cover a period which includes the date of Closing. Property tax
returns will be filed by the party which owns the property subject to the return
on the assessments date, but responsibility for the tax amount will be
determined pursuant to Article 6.1 (a).
(d) Transferee shall be liable for all title opinions, title insurance,
recording fees, surveys, notarial fees, and other fees and costs arising out of
the transfer, or
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assignment of the Assets, or otherwise on account of this Agreement or the
transactions contemplated herein. Transferee shall promptly pay and discharge
the costs of such items and shall promptly reimburse Transferor for any amounts
Transferor may have expended on such items.
6.2 Further Assurances. At any time and from time to time after the Closing, the
parties agree to cooperate with each other, but in all cases at Transferee's
sole cost and expense, to execute and deliver such other documents, instruments
of transfer or assignment, files, books and records and do all such further acts
and things as may be reasonably required to carry out the transactions
contemplated hereunder.
6.3 Records Retained by Transferor. The parties agree that, except as may
otherwise be provided in this Agreement, Transferor shall transfer and deliver
to Transferee after the Closing all data, records and other information which
pertain exclusively to the Business with the exception of documents created for
this transaction, including, without limitation tax records and personnel
records (all of the foregoing being hereinafter called "Business Records"). To
the extent that the original copies of any such Business Records also contain
information relating to Transferor or any of its affiliates, Transferor and the
affiliates may deliver to Transferee copies deleting such non-Business
information but shall not destroy the original Business Records except in
accordance with normal records retention policies, or otherwise take action to
make such original Business Records unavailable to Transferee. Any Business
Records which Transferor required in
24
<PAGE> 25
connection with pending or threatened litigation, or which are otherwise subject
to Hold Orders as provided in Transferor's records retention policy manual, may
be retained by Transferor and copies thereof delivered to Transferee.
6.4 Access to Records by Transferor. Following the Closing, Transferee shall
give to Transferor and its authorized representatives full access, during
regular business hours, to any and all of its premises, properties, contracts,
books, records and date related to the Business, and will cause its officers,
directors and employees to furnish to Transferor, without compensation therefor,
any and all data and information pertaining to the Assets or the operation
thereof that Transferor shall from time to time request, including requests for
information reasonable required (as determined in good faith by Transferor's Tax
Department) to enable Transferor to file Federal, state, local or foreign income
or other tax returns.
6.5 Preservation of Records. Transferee agrees that it shall preserve and keep
the records of Transferor delivered to it hereunder for the period from and
after the Closing prescribed by any government agency or ongoing litigation, and
shall make such records available to Transferor as may be reasonably required in
connection with any legal proceedings against or governmental investigations of
Transferor or in connection with any tax examination of Transferor. In the event
Transferee wishes to destroy such records after that time, Transferee shall
first give ninety (90) days prior written notice to Transferor and Transferor
shall have the right at its option and expense, upon prior
25
<PAGE> 26
written notice given to Transferee within said ninety (90) day period, to take
possession of said records within one hundred and eight (180) days after the
date of Transferor's notice to Transferee hereunder.
6.6 Use of Trademarks and Transferor's Name. Transferor recognizes that certain
Inventory and labels and containers therefor, as well as promotional material
relating to such Inventory ("existing supplies"), being conveyed to Transferee
under this Agreement will bear the trademarks UCAR or UCAR Carbon Company which
by themselves, are not being assigned to Transferee. Transferor agrees that
Transferee will be permitted to sell such existing supplies. Upon depletion of
such existing supplies, Transferee will identify itself as the source of
products made by or for Transferee. Future use of these Trademarks after
depletion of existing supplies will be pursuant to a license agreement to be
agreed between the parties.
ARTICLE 7- BULK SALES LAW
7.1 Transferee hereby waives compliance by Transferor with any bulk sales law
which may be applicable.
ARTICLE 8 - PUBLICITY; CONFIDENTIALITY
8.1 Publicity. Transferee agrees that no publicity, release or announcement
concerning the execution of this Agreement, any of the provisions of this
Agreement, or the transactions contemplated hereby, shall be issued without the
advance written approval of Transferor.
26
<PAGE> 27
8.2 Confidentiality. Each party hereto agrees to refrain from using in any
manner, and to use its best efforts to keep confidential, any and all
information and data concerning the business of the other party or its
affiliates which I has received, except to the extent that such party can
demonstrate that the information (a) is generally available to the public as
evidenced by prior written publication through no act or failure to act by it,
(b) was already known to it on a non-confidential basis on the date of receipt
as evidenced by written and dated records made by it prior to this date, (c) is
developed independently of such information by the party as evidenced by written
documentation, or (d) is subsequently disclosed to it on a non-confidential
basis by a third party not having a confidential relationship with said other
party with respect to such information. Notwithstanding the foregoing, each of
the parties hereto shall be free to disclose any such information or data to the
extent and only to the extent (a) required by applicable law, and (b) during the
course of or in connection with any litigation, governmental investigation,
arbitration or other proceeding based upon or in connection with the subject
matter of this Agreement. Prior to any disclosure pursuant to the preceding
sentence, the disclosing party shall be required to give reasonable prior notice
to the other party to this Agreement of such intended disclosure and, if
requested by such party, to use its best efforts to obtain a protective order or
similar protection for such other party.
ARTICLE 9- NOTICES
27
<PAGE> 28
9.1 Any notices or communications permitted or required hereunder shall be
deemed sufficiently given if hand-delivered, or sent (i) postage prepaid by
registered or certified mail - return receipt requested, (ii) by telex, or (iii)
by reputable overnight courier to the respective parties as set forth below, or
to such other address as any party may notify the other of in writing:
if to Transferor, to: UCAR Carbon Company
3102 West End Avenue, Suite 1100
Nashville, Tennessee 37203
Attention: President
with a copy to General Counsel
if to Transferee, to: UCAR Graph-Tech Inc.
11709 Madison Avenue
Lakewood, Ohio 44107
Attention: President
ARTICLE 10 - MISCELLANEOUS
10.1 Binding Effect; Assignment. This Agreement shall be binding upon, and inure
to the benefit of, all the parties hereto and their respective successors, legal
representatives, and assigns permitted in accordance with this Article. Nothing
herein shall create or be deemed to create any third party beneficiary rights in
any person or entity not a party to this Agreement. No assignment of this
Transfer Agreement, or of any rights or obligations hereunder, may be made by
either party hereto (by operation of law or otherwise) without the prior written
consent of the other parties hereto. Any attempted assignment without the
required consent shall be void.
10.2 Schedules. All Schedules attached hereto, and the documents and agreements
28
<PAGE> 29
referred to herein to be delivered, and the acts to be performed at or
subsequent to the Closing ("Items") are incorporated herein and expressly made a
part of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any of such Items shall be deemed to
refer to and include all of said items.
10.3 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all, of the parties hereto.
In pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one such counterpart.
10.4 Headings. The headings contained in this Agreement are inserted for
convenience of reference only and shall not otherwise affect the meaning or
interpretation or be deemed a substantive part of this Agreement.
10.5 Waiver. The failure of any party at any time or times to enforce or require
performance of any provision hereof shall in no way operate as a waiver or
affect the right of such party at a later time to enforce the same. No waiver by
any party of any condition or the breach of any term, covenant, representation
or warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instance, shall be deemed to be or construed as a further or
continuing waiver of any such condition or
29
<PAGE> 30
breach, or a waiver of any other condition, or of any breach of any other term,
covenant, representation or warranty contained in this Agreement.
10.6 Severability. If any provision of this Agreement shall hereafter be held to
be invalid or unenforceable for any reason, that provision shall be reformed to
the maximum extent permitted to preserve the parties' original intent, failing
which, it shall be severed from this Agreement with the balance of the Agreement
continuing in full force and effect; provided, however, that Transferor shall
have no obligation to consummate the transactions contemplated hereby if the
provision being reformed or severed affects the consideration for the Assets as
provided in Article 2 hereof. Such occurrence shall not have the effect of
rendering the provision in question invalid in any other jurisdiction or in any
other case or circumstances, or of rendering invalid any other provisions
contained herein to the extent that such other provisions are not themselves
actually in conflict with any applicable law.
10.7 Governing Law and Forum. This Agreement shall be governed by and construed
in all respects under the laws of the State of Delaware, without reference to
its conflicts of laws rules or principles. Any action to enforce, or which
arises out of or in any way relates to, any of the provisions of this Agreement
shall be brought and prosecuted in such court or courts located within the State
of Delaware as provided by law; and the parties consent to the jurisdiction of
said court or courts located within the State of Delaware, and to service of
process by registered mail, return receipt requested, or by any
30
<PAGE> 31
other manner provided by Delaware law.
10.8 Entire Agreement. This Agreement and all the Schedules attached hereto, and
all other documents and certificates referred to herein, constitutes the entire
understanding of the parties hereto concerning the sale, purchase and use of the
Assets and operation thereof, and cancels and supersedes all previous agreements
and understandings, oral or written, between the parties with respect to the
subject matter hereof. Transferee disclaims reliance upon any representations,
warranties or guarantees, either express or implied, by Transferor, its
employees or agents. No modification of this Agreement or waiver of the terms,
conditions, warranties, representations and rights hereunder will be binding
upon either party unless signed in writing by an authorized representative of
such party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
UCAR CARBON COMPANY INC.
By: /s/ Karen G. Narwold
--------------------
Title: Vice President
--------------
UCAR GRAPH-TECH INC.
By: /s/ John Wetula
---------------
Title: President
---------
31
<PAGE> 32
SCHEDULE A
[Omitted]
32
<PAGE> 33
SCHEDULE B
[Omitted]
33
<PAGE> 34
SCHEDULE C
[Omitted]
34
<PAGE> 35
SCHEDULE D
[Omitted]
35
<PAGE> 36
SCHEDULE E
[Omitted]
36
<PAGE> 37
SCHEDULE F
[Omitted]
37
<PAGE> 38
SCHEDULE G
[Omitted]
38
<PAGE> 39
SCHEDULE H
[Omitted]
39
<PAGE> 40
SCHEDULE "I"
[Omitted]
40
<PAGE> 1
Exhibit 10.2
AMENDMENT
To Transfer Agreement
This Amendment made as of this 14th day of February, 2000 between UCAR
Carbon Company Inc. ("UCAR") and UCAR Graph-Tech Inc. ("Graph-Tech").
WHEREAS UCAR. did enter into a Transfer Agreement with Graph-Tech
effective January 1, 2000, (the "Transfer Agreement"); and
WHEREAS the parties wish to amend the Transfer Agreement to add certain
real property to the list of transferred Assets to facilitate the creation of a
new production facility; and
WHEREAS this additional transfer of Assets is done in furtherance of
the business purposes underlying the original transfer and the real property
shall be considered an additional contribution to the capital of Graph-Tech;
THEREFORE in consideration of the premises and the mutual covenants set
forth herein, the parties agree to amend the Transfer Agreement as follows:
1. Effective immediately, Section 1.1 of the Transfer Agreement is
hereby amended to add the following Section 1.1 (x) as follows:
(x) all parcels of real property (including all buildings,
improvements and structures located on the property and
appurtenances) whether owned, leased or otherwise held, listed
on Schedule H attached and incorporated by reference ("Real
Property").
2. UCAR shall deliver or cause to be delivered to Graph-Tech a fully
executed and recordable Quit-Claim Deed for the Real Property and building
identified in Schedule H.
3. The terms of the Transfer Agreement shall remain in full effect and
shall govern the actual transfer of the Real Property.
<PAGE> 2
UCAR CARBON COMPANY INC. UCAR GRAPH-TECH INC.
By: /s/ Erick Asmussen By: /s/ John Wetula
-------------------------- ---------------------------------
Title: Controller Title: President
<PAGE> 3
SCHEDULE H
[Omitted]
<PAGE> 1
Exhibit 10.3
AMENDMENT NO. 2
To Transfer Agreement
This Amendment made as of this 29th day of March, 2000 between UCAR
Carbon Company Inc. ("UCAR") and UCAR Graph-Tech Inc. ("Graph-Tech").
WHEREAS, UCAR. did enter into a Transfer Agreement with Graph-Tech
effective January 1, 2000, (the "Transfer Agreement");
WHEREAS, the parties wish to amend the Transfer Agreement to provide
for the transfer of cash-on-hand as of January 1, 2000; and
WHEREAS, Graph-Tech wishes to assume and accept the liability and
assets associated with the pension funds to which the Employees, as defined in
the Transfer Agreement, may be entitled under the UCAR Carbon Retirement Trust
identified in Schedule I to the Transfer Agreement as the UCAR Carbon Retirement
Plan;
THEREFORE in consideration of the premises and the mutual covenants set
forth herein, the parties agree to amend the Transfer Agreement as follows:
1. Effective January 1, 2000, Section 1.1 of the Transfer Agreement is
hereby amended to add the following:
(xi) all cash as shown on the balance sheet of the Business as of
January 1, 2000.
(xii) all pension funds, contained within the UCAR Carbon Retirement
Trust, to which the Employees, transferred pursuant to Section 4.1 of
the Transfer Agreement, may be entitled. UCAR shall provide a detailed
accounting of the funds and liabilities to be transferred to
Graph-Tech. The total of the funds transferred shall match or exceed
the total of all liabilities, fixed and/or contingent, vested or
unvested, which are transferred to Graph-Tech.
2. Effective January 1, 2000, Section 1.2 of the Transfer Agreement is
hereby amended to delete Section 1.2 (i) and to modify Section 1.2 (ii) to
delete any reference to pension funds.
3. Effective January 1, 2000, Section 3.2 of the Transfer Agreement is
hereby
<PAGE> 2
amended to add the following:
(d) Except to the extent Transferor shall continue to administer the
Graph-Tech funds within the UCAR Carbon Retirement Trust, Transferee
shall assume all obligations and liabilities associated with the
pension plan.
4. Effective January 1, 2000, Section 4.1 of the Transfer Agreement is hereby
amended and revised as follows:
The following language is deleted:
"Effective as of the Closing and until such time as the Board
of Directors of the Transferee may determine otherwise, all Employees
and other employees of Transferee shall participate in the Retirement
Program Plan for Employees of UCAR Carbon Company and its Participating
Subsidiary Companies, the Savings Plan for Employees of UCAR Carbon
Company and Participating Subsidiary Companies, as well as those other
benefit plans identified in Schedule I hereto for so long as Transferee
is a subsidiary of Transferor or its assigns and provided Transferor or
its assigns continue to maintain such plan or plans."
The following language is added in its place:
"Effective as of the Closing and until such time as the Board
of Directors of the Transferee may elect to modify the pension, savings
and other funded employee benefit plans of Graph-Tech, all Employees
and other employees of Transferee shall participate in the UCAR Carbon
Retirement Trust, administered by UCAR, the UCAR Carbon Savings, as
well as those other benefit plans identified in Schedule I of the
Transfer Agreement for so long as Transferee is a subsidiary of
Transferor or its assigns and provided Transferor or its assigns
continue to maintain such plan or plans. UCAR shall hold the Graph-Tech
pension funds in trust for the benefit of Graph-Tech and administer
those funds within the framework of the UCAR Carbon Retirement Trust
and pursuant to the Employee Benefits and Services Agreement."
5. The parties shall execute all documentation and obtain all consents
necessary to effectuate this transaction.
6. The remaining terms of the Transfer Agreement shall remain in full
effect.
UCAR CARBON COMPANY INC. UCAR GRAPH-TECH INC.
By: /s/ Erick Asmussen By: /s/ John J. Wetula
- --------------------------- ------------------------------------
<PAGE> 3
Title: Controller Title: President
<PAGE> 1
Exhibit 10.4
CORPORATE SERVICES AGREEMENT
BETWEEN
UCAR INTERNATIONAL INC.
AND
UCAR GRAPH-TECH INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 - GENERAL DESCRIPTION OF SERVICES; AFFILIATES 3
ARTICLE 2 - SERVICES TO BE PROVIDED 5
ARTICLE 3 - PERIOD OF SERVICES: TERM 5
ARTICLE 4 - COMPENSATION; PAYMENT 6
ARTICLE 5 - REPRESENTATIONS 7
ARTICLE 6 - INDEPENDENT CONTRACTOR 7
ARTICLE 7 - TAXES 7
ARTICLE 8 - CLAIMS 9
ARTICLE 9 - INDEMNITY 9
ARTICLE 10 - FORCE MAJURE 10
ARTICLE 11 - CONFIDENTIALITY 11
ARTICLE 12 - NOTICES 12
ARTICLE 13 - MISCELLANEOUS 13
ANNEX 1
ANNEX 2
</TABLE>
2
<PAGE> 3
CORPORATE SERVICES AGREEMENT
SERVICES AGREEMENT made as of this 1st day of January, 2000 between
UCAR International Inc., a Delaware corporation acting through its various
corporate departments and subsidiaries ("UCAR"), and UCAR Graph-Tech Inc., a
Delaware corporation ("Graph-Tech").
WITNESSETH:
WHEREAS, UCAR's wholly owned subsidiary UCAR Carbon Company Inc. on the
date hereof (the "Closing Date") shall transfer the assets and liabilities of
its natural, acid-treated and flexible graphite businesses into Graph-Tech (the
"Transfer"); and
WHEREAS, it is the intention of the parties that certain services
performed prior to the Transfer by UCAR for Graph-Tech shall continue to be
provided after the Transfer; and
WHEREAS, subject to the terms and conditions set forth herein, each
party to this Agreement desires to have the other party render or cause to be
rendered the services more specifically described hereinafter;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties agree as follows:
ARTICLE 1 - GENERAL DESCRIPTION OF SERVICES; AFFILIATES
1.1 As used herein, the terms "Services" shall mean the services
described in Annex 1 attached hereto which will be supplied by UCAR hereunder
for Graph-Tech and its domestic subsidiaries and the services described in Annex
2 attached hereto which will be supplied by Graph-Tech to UCAR.
3
<PAGE> 4
1.02 The purpose of this Agreement is to enable both parties to
continue to operate in the same manner as before the Closing Date. In general,
the type quality and level of utilization of the Services after the Closing Date
shall be the same as the type, quality and level of utilization of the
comparable services provided by UCAR prior to the Closing Date except (i) as
otherwise set forth herein or as reasonably requested by either party and (ii)
that, in no event, shall the quality of the Services being supplied hereunder be
less than the quality of comparable services being concurrently supplied to
other businesses of UCAR. Notwithstanding the foregoing, the parties recognize
that in some cases the practices, procedures and methods followed in connection
with providing such comparable services prior to the Closing Date will have to
be modified in order to provide the Services after the Closing Date.
1.03 The parties recognize that the Services may include services
which, by their nature, are required to be provided by or to affiliates or
subsidiaries of the parties. The parties also recognize that such affiliates or
subsidiaries may enter into other service agreements with respect to the
provision of such Services ("Affiliate Agreements"). The parties shall (i) to
the extent required in order to provide such Services, cause their affiliates
and subsidiaries to provide such Services as if such affiliates and subsidiaries
were the parties themselves, and (ii) provide or cause their affiliates or
subsidiaries to provide such Services to each other's subsidiaries, and each
party shall cause its subsidiaries to pay for such Services as if such
subsidiaries were the parties themselves. In connection with the provision of
such Services, each party's affiliates and subsidiaries shall be entitled to the
benefits of (i) the limitations on liability set forth herein and (ii) the
limitations on the obligation to provide Services set forth herein as if such
subsidiaries and affiliates were the respective parent corporation. To the
extent that such subsidiaries and affiliates enter into Affiliate Agreements
with respect to such Services, such Affiliate Agreements shall supersede this
Agreement in
4
<PAGE> 5
respect of such Services.
ARTICLE 2 - SERVICES TO BE PROVIDED
2.01 Each party shall provide the Services to the other party
throughout the term of this Agreement; and
2.02 The parties may, at any time during the term of this Agreement,
mutually agree to amend Annex 1 or 2 so as to delete, include or modify services
which are related to the conduct of their business.
ARTICLE 3 - PERIOD OF SERVICES: TERM
3.01 Either party may terminate its obligation to provide or to receive
and pay for, as the case may be, any or all Services or any category of Services
upon mutual consent or upon twelve (12) months' prior written notice to the
other party.
3.02 The term of this Agreement shall commence on the date hereof and
shall continue thereafter as long as any Service covered hereby shall continue
to be provided in accordance with this Agreement, unless sooner terminated in
accordance with the terms set forth herein.
3.03 Upon the termination of this Agreement the parties shall be
released from any and all obligations to perform the Services hereunder subject
to the terms of this Agreement. However, the parties' respective obligations
under Articles 4 and 8 shall survive.
ARTICLE 4 - COMPENSATION; PAYMENT
4.01 Each party shall pay or cause to be paid to the other or its
designee
5
<PAGE> 6
a fee for each Service as set forth in Annex 1 and Annex 2 and determined in
accordance with Section 4.02 (a "Fee").
4.02 The Fee for each Service shall be determined in accordance with
UCAR's standard internal accounting practices and procedures for determining the
cost of such Services prevailing as of the date hereof; provided, however, that
if such practices and procedures are changed by either party after the Closing
Date, such changed practices shall be used to determine such Fee only with the
prior written consent of the other party, which consent shall not be
unreasonably withheld. It is the intent of this Agreement that the cost of
Services would be the same as would be charged if Graph-Tech were a division of
UCAR Carbon Company Inc. Cost is generally defined as departmental expense
(wages and related overhead directly associated with the department, fringe
benefits, rent, telephone expense, supplies and travel expense which is charged
to a departmental unit, etc.) in accordance with the provider's practices and
procedures for determining departmental costs.
4.03 The parties shall invoice each other for the Services on such
intervals as may be determined by the parties, but not less frequently than
quarterly. Payment of each invoice shall be due net thirty (30) days from the
date of such invoice.
4.04 If, within thirty (30) days following receipt of any invoice,
either party notifies the other in writing that
6
<PAGE> 7
it questions all or any party of the Fee reflected in such invoice, (i) the
notifying party may withhold payment of the amount in question and (ii) the
billing party shall provide to the notifying party within thirty (30) days after
receipt of such notice a certificate, signed by the appropriate financial
officer or department head of billing party, answering the question in
reasonable detail sufficient to permit the notifying party to verify the
accuracy of such Fee together with documentary evidence of the basis for the
calculation of such Fee. Pending receipt of any such certificate and documentary
evidence, the notifying party shall pay or cause to be paid the unquestioned
amount of such Fee to the billing party or its designee when due. Within ten
(10) days after receipt of such certificate and documentary evidence, the
notifying party shall (i) pay or cause to be paid the balance of such Fee to the
billing party or its designee, or (ii) give written notice to the billing party
that the notifying party continues to so question the Fee. Promptly after
receipt of such notice, the parties shall meet to negotiate in good faith a
resolution of such questions. If the parties cannot resolve the question in a
mutually satisfactory manner within thirty (30) days after such notice
7
<PAGE> 8
shall have been given, the question shall promptly be submitted to the
independent public accountants retained by the parties, whose decision shall be
final and binding on both parties. Such firm will review the books and records
of the parties (and their respective subsidiaries and affiliates, as the case
may require) and make such other investigation as it shall deem necessary to
resolve the question. The costs of retaining such firm shall be borne by the
party against whom the accountants find.
ARTICLE 5 - REPRESENTATIONS
THERE ARE NO REPRESENTATIONS OR WARRANTIES BY EITHER PARTY WITH RESPECT
TO THE SERVICES EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT. NO
REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW,
INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES.
ARTICLE 6 - INDEPENDENT CONTRACTOR
Each party and their subsidiaries and affiliates shall be deemed to be
independent contractors, and not agents, partners or joint venturers, in
connection with the supplying of the Services.
ARTICLE 7 - TAXES
In addition to any other amounts payable the party receiving Services
shall
8
<PAGE> 9
promptly reimburse the provider of the Services for any taxes, excises, imposts,
duties, levies, withholdings or other similar charges (except any taxes,
excises, imposts, duties, levies, withholdings or charges based on net income)
that such provider may be required to pay on account of the performance of
Services, provided, however, that the provider shall not be entitled to receive
any such payment to the extent any of the foregoing have been included in the
calculation of the Fee. Any amount payable under this provision shall be
computed so as to hold the performing party harmless on an after tax basis.
ARTICLE 8 - CLAIMS
Receipt of any Service hereunder shall constitute an unqualified
acceptance of such Service and a waiver of any and all claims with respect to
the Service unless either party receives written notice of a claim within sixty
(60) days after receipt. No claim resulting from the breach of this Agreement or
as to any Service provided whether based on negligence, strict liability in
tort, breach or warranty or any other basis, shall be greater in amount than the
Fee for that portion of the Service in respect of which such claim is made, and
in no event will either party be liable to the other or its subsidiaries for any
special, indirect, incidental or consequential damages or any lost profits,
whether or not caused by or resulting from such negligence, strict liability,
breach of warranty or other basis of claim hereunder, provided, however, that
such limitations shall not apply to damages caused by or resulting from gross
negligence, fraud or willful misconduct.
9
<PAGE> 10
ARTICLE 9 - INDEMNITY
Except as otherwise provided in this Agreement, or any ancillary
agreement, effective as of the date of this Agreement, each party shall, without
any further responsibility or liability of or recourse to the other or its
affiliates or any of the other party's or the other party's affiliates'
directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees or assigns, be solely liable and
responsible for any and all claims, liabilities, obligations, losses,
deficiencies and damages (except for civil or criminal penalties or punitive
damages), or judgments of any kind or nature whatsoever arising out of the
furnishing or failing to furnish the Services provided for in this Agreement,
(all of which are hereinafter called "Liabilities"), regardless of by whom
asserted and regardless of whether or not any Liabilities are known or unknown,
fixed or contingent or asserted or unasserted, but only to the extent that such
Liabilities arise out of the furnishing of the Services after the effective date
of this Agreement. Each party shall indemnify and hold the other and its
affiliates and their respective directors, shareholders, officers, employees,
agents, consultants, representatives, successors, transferees and assigns
harmless from and against any and all Liabilities (including without limitation
reasonable fees and expenses of counsel) of whatever kind and nature, but only
to the extent such Liabilities arose, and the facts on which they are based,
occurred, following the effective date of this Agreement. Notwithstanding the
foregoing, each party shall have any and all rights to pursue claims against the
other or the others affiliates'
10
<PAGE> 11
or its or their directors, shareholders, officers, employees, agents,
consultants, representatives, successors, transferees and assigns for fraud,
gross negligence, willful misconduct or breach of contract.
ARTICLE 10 - FORCE MAJURE
Neither party shall be liable for its failure to perform hereunder to
the extent that its performance is made impracticable, delayed or prevented, in
whole or in part, due to any occurrence beyond its reasonable control, including
without limitation; acts of God; inclement weather; floods; accidents; strikes;
lockouts; fires; wars; equipment failures; labor disputes; labor shortages;
riots; demonstrations; sabotage; laws, ordinances, rules, regulations, standards
or decrees of governmental or other authorities, whether valid or invalid
(including, without limitation, import or export prohibitions or priorities,
requisitions, allocations and price adjustment restrictions); inability to
obtain or unavoidable delay in obtaining necessary power, materials, facilities,
services or equipment; interruption or unavoidable delay in communication or
transportation; or any other occurrence which could have a material adverse
impact on the ability of the party to perform this Agreement. If the obligations
of one party are suspended pursuant to the preceding sentence, such party shall
give written notice to that effect to the other within then (10) days after
suspension shall have commenced together with a statement setting forth
reasonably full particulars concerning the cause of the suspension and shall use
all possible diligence to remedy the cause of the suspension as quickly as
possible. The requirement that the cause of the
11
<PAGE> 12
suspension be remedied with all possible diligence shall not require the
settlement of strikes, lockouts or other labor difficulties.
ARTICLE 11 - CONFIDENTIALITY
Each party agrees to refrain from using in any manner and to use its
best efforts to keep confidential, any and all information and data concerning
the business and affairs of the other party of its affiliates which it has
received as a result of this Agreement except to the extent that such party can
demonstrate that the information or data (i) is generally available to the
public as evidenced by prior written publication through no act of failure to
act of it, (ii) was already known to it on a non-confidential basis on the date
of receipt as evidenced by written and dated records made by it prior to the
date hereof, (iii) was independently developed without reference to the other
parties information as evidenced by written documentation, or (iv) is
subsequently disclosed to it on a non-confidential basis by a third party not
having a confidential relationship with such other party with respect to such
information. Notwithstanding the foregoing, each of the parties shall be free to
disclose any such information or data to the extent and only to the extent (i)
required by applicable law or by a government in a duly authorized
investigation, or (ii) necessary to establish such party's position in any
litigation or any arbitration or other proceeding based upon or in connection
with the subject matter of this Agreement, including without limitation, the
failure of the transactions contemplated hereby to be consummated. Prior to any
disclosure pursuant to the preceding sentence, the disclosing party
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shall give reasonable prior notice to the other party to this Agreement of such
intended disclosure and, if requested by such party, shall use all reasonable
efforts to obtain a protective order or similar protection for such other party.
ARTICLE 12 - NOTICES
All notices permitted or required to be given hereunder shall be given
by personal delivery, telex, telecopy, reputable overnight carrier, or
registered or certified mail, return receipt requested, postage prepaid,
addressed to the receiving party at its address set forth below:
When UCAR is the receiving party:
UCAR International Inc.
3102 West End Avenue, Suite 1100
Nashville, Tennessee 37203
Attention: President
With a copy to: General Counsel
When Graph-Tech is the receiving party:
UCAR Graph-Tech Inc.
11709 Madison Avenue
Lakewood, Ohio 44107
Attention: President
Any party may change its address for such purpose by giving written
notice to the other party of such change. Any notice so delivered,
telecopied or telexed shall be deemed to have been duly given upon
receipt and any notice so mailed shall be deemed to have been given
four (4) business days after so mailed.
ARTICLE 13 - MISCELLANEOUS
13.01 This Agreement shall be binding upon, and inure to the benefit
of, the parties and their respective successors and permitted assigns. Except as
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otherwise expressly provided herein, nothing contained herein shall be deemed to
create any third party beneficiary rights in any individual who or entity which
is not a party. Any assignment or delegation of this Agreement by either party
without the prior written consent of the other party shall be void except that
no such consent shall be required with respect to an assignment or delegation
made (i) to a subsidiary or affiliate of a party or (ii) in connection with the
sale, transfer or other disposition of all substantially all of the businesses
of either party.
13.02 This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument. In pleading or proving any provision of this
Agreement, it shall not be necessary to produce more than one such counterpart.
13.03 The headings contained in this Agreement are inserted for
convenience of reference only and shall not otherwise affect the meaning or
interpretation or be deemed to be a substantive part of this Agreement.
13.04 The failure of either party at any time to enforce or require
performance of any provision contained in this Agreement shall in no way operate
as a waiver or affect the right of such party at a later time to enforce such
provision.
13.05 If any provision contained in this Agreement shall be held to be
invalid or unenforceable in any jurisdiction for any reason, such provision
shall be reformed to the maximum extent permitted to preserve the parties'
original intent, failing which it shall be severed from this Agreement with the
balance of this
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Agreement continuing in full force and effect. Such reformation or severance
shall not have the effect of rendering such provision invalid or unenforceable
in any other jurisdiction or in any other case or circumstances or of rendering
invalid or unenforceable any other provision contained in this Agreement to the
extent that such other provision is not itself actually in conflict with any
applicable law.
13.06 THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAW OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS RULES OR
PRINCIPLES.
13.07 This Agreement and all the Annexes or Exhibits attached hereto,
and all other documents and certificates referred to herein, constitute the
entire understanding of the parties concerning the services to be performed
hereunder and cancels and supersedes all previous agreements and understandings,
oral or written, between the parties with respect to the subject matter hereof.
No modification of this Agreement or waiver of any provision or right hereunder
will be binding upon either party unless signed in writing by an authorized
representative of such party.
13.08 All capitalized terms used herein or in the Annexes attached
hereto which are not otherwise defined herein or therein shall have the meanings
assigned to them in the appropriate Transfer Agreement dated as of December 31,
1999 between UCAR Carbon Company Inc. and Graph-Tech.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above
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written.
UCAR International Inc. UCAR Graph-Tech Inc.
By: /s/ Karen G Narwold By: /s/ John J. Wetula
------------------------- -----------------------------------
Name: Karen G. Narwold By: John J. Wetula
----------------------- -----------------------------------
Title: Vice President Title: President
---------------------- --------------------------------
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<PAGE> 1
Exhibit 10.5
TECHNICAL CENTER SERVICES AGREEMENT
SERVICES AGREEMENT made as of the 1st day of January 2000
between UCAR CARBON COMPANY INC., a Delaware corporation ("UCAR"), and UCAR
GRAPH-TECH INC., a Delaware corporation ("GRAPH-TECH").
W I T N E S S E T H :
WHEREAS, UCAR has been engaged in the business of producing
natural, acid-treated and flexible graphite products (the "Business");
WHEREAS, as of the date hereof (the "Closing Date"), UCAR has
transferred to GRAPH-TECH all assets related to the Business pursuant to the
Transfer Agreement effective January 1, 2000 between UCAR and GRAPH-TECH (the
"Transfer Agreement"); and
WHEREAS, GRAPH-TECH desires to have UCAR provide certain
services to GRAPH-TECH to facilitate the transfer of the operations of the
Business to GRAPH-TECH's control and certain site services to GRAPH-TECH to
enable GRAPH-TECH to operate the Business immediately following transfer of
ownership in the same manner in which the Business was operated prior to the
transfer of ownership and UCAR is willing to provide the services on the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises,
representations and warranties and the mutual covenants and agreements contained
herein and other good, valuable and sufficient consideration, the receipt of
which is hereby acknowledged, UCAR and GRAPH-TECH (collectively, the "Parties"
and, sometimes individually, a "Party"), intending to be legally bound, hereby
agree as follows:
SECTION 1 - SERVICES TO BE PROVIDED
1.1 As used herein, the term "Services" shall mean the services
described in Schedule 1.1 attached hereto. The parties may, at any time during
the term of this Agreement, mutually agree to amend Schedule 1.1 so as to
delete, add or modify services. Any such amendment must be in a writing signed
by both parties, except for such changes as provided for in Schedule 1.1.
1.2 Except as otherwise provided in Schedule 1.1 attached hereto
or otherwise mutually agreed by the parties, the Services shall be provided in
the same manner, to the same extent and with the same care with which they were
provided to the Business by the other business units of UCAR prior to the date
hereof and shall be provided subject to and in accordance with the policies,
practices, procedures, standards, methods and rules of UCAR from time to time in
effect, including, without limitation, those related to occupational health and
safety, security and environmental protection. After the date hereof, except as
required by law, UCAR shall not adopt policies, practices, procedures,
standards, methods or rules which unreasonably discriminate against the Business
or modify existing policies, practices, procedures, standards, methods or rules
so as to unreasonably discriminate against the Business.
<PAGE> 2
SECTION 2 - PERIOD OF SERVICES; TERM
2.1 Except as provided for in Schedule 1.1, GRAPH-TECH may
terminate any service and obligation to pay for any or all Services or any
category of Services upon thirty (30) days written notice to UCAR.
2.2 The term of this Agreement shall commence on the date hereof
and shall continue for the periods specified in Schedule 1.1 or unless sooner
terminated in accordance herewith.
2.3 Upon the termination of this Agreement, the parties shall be
released from any and all obligations hereunder; provided, however, that the
parties' respective rights and obligations under Sections 3, 4, 6, 7, 8 and 10
shall survive such termination.
SECTION 3 - COMPENSATION; PAYMENT
3.1 GRAPH-TECH shall pay to UCAR rent and fees for the Services
(a "Fee"). The Fee shall be as specified in Schedule 1.1 and shall determined in
accordance with this Section 3.
3.2 The Fee shall not include, and UCAR shall be separately
reimbursed by GRAPH-TECH for its payment of, (i) the cost of purchasing any
extraordinary supplies required in connection with providing the Services, (ii)
the fees, costs and charges payable to third parties in connection with the
Services (including, without limitation, postage, express delivery and messenger
charges, common carrier charges and fees and expenses payable to engineering,
accounting, law and other professional firms) and (iii) all liabilities and
obligations in respect of which the Services constitute only an administrative,
clerical or ministerial service.
3.3 UCAR shall invoice, or cause to be invoiced, GRAPH-TECH on a
quarterly basis for the Fees and reimbursements due hereunder. Payment of each
invoice shall be due net 30 days from the date of such invoice.
SECTION 4 - LIMITATION ON REPRESENTATIONS
THERE HAVE BEEN, ARE AND WILL BE NO REPRESENTATIONS, WARRANTIES
OR GUARANTEES BY UCAR WITH RESPECT TO THE SERVICES EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT. NO REPRESENTATION, WARRANTY OR GUARANTEE SHALL BE IMPLIED
UNDER THIS AGREEMENT OR AT LAW, INCLUDING, WITHOUT LIMITATION, WARRANTY OF
MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AS TO THE
SERVICES.
SECTION 5 - INDEPENDENT CONTRACTOR
UCAR shall be deemed to be an independent contractor, and not an
agent, partner or joint venturer, in connection with the provision of the
Services.
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SECTION 6 - TAXES
In addition to any other amounts payable hereunder, UCAR shall
promptly be reimbursed by GRAPH-TECH for any taxes, excises, imposts, duties,
levies, withholdings or other similar charges (except for taxes, excises,
imposts, duties, levies, withholdings or charges based on net income) that may
be required to be paid on account of the Services; provided, however, that no
such reimbursement shall be made to the extent any of them have been included in
the calculation of the Fees.
SECTION 7 - CLAIMS
Receipt of any of the Services hereunder shall constitute an
unqualified acceptance of such Services and a waiver of any and all claims with
respect to such Services unless UCAR receives written notice of such claims from
GRAPH-TECH within 30 days after such receipt. In the case of delayed provision
or non-provision of any Services, any and all claims with respect to such
delayed provision or non-provision shall be waived unless written notice of such
claims is received by UCAR within 30 days after the date on which such Services
were first required to be provided. No claim resulting from the breach of this
Agreement, as to any Services provided hereunder or for delayed provision or
non-provision of any Service hereunder, whether based on negligence, strict
liability in tort or breach of warranty or on any other basis, shall be greater
in amount than the Fees for that portion of the Services in respect of which
such claim is made, and in no event will UCAR be liable to GRAPH-TECH for any
special, indirect, incidental or consequential damages or any lost profits,
whether based on negligence, strict liability in tort or breach of warranty or
on any other basis, even if informed of the possibility of such damages in
advance.
SECTION 8 - INDEMNITY
Except as otherwise provided in the Transfer Agreement,
GRAPH-TECH shall, without any responsibility or liability of or recourse to UCAR
or its affiliates, directors, shareholders, officers, employees, agents,
consultants, representatives, successors, transferees or assignees, be solely
liable and responsible for any and all claims, liabilities, obligations, losses,
deficiencies, damages (except for civil or criminal penalties or punitive
damages) and judgments of any kind arising out of the actions or inactions of
GRAPH-TECH regardless of whom they are asserted by or against, and regardless of
whether they are known or unknown or fixed or contingent (the "Liabilities").
GRAPH-TECH shall indemnify UCAR and its affiliates, directors, shareholders,
officers, employees, agents, consultants, representatives, successors,
transferees and assignees for, and shall hold them harmless from and against,
any and all Liabilities (including, without limitation, reasonable fees and
expenses of counsel) of any kind or nature whatsoever. Notwithstanding the
obligations setout above, Graph-Tech shall not be obligated to defend or
indemnify UCAR for UCAR or UCAR's employees negligence or willful conduct.
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<PAGE> 4
SECTION 9 - FORCE MAJEURE
UCAR shall not be liable for its failure to perform hereunder to
the extent that its performance is made impracticable, delayed or prevented, in
whole or in part, due to any occurrence beyond its reasonable control,
including, without limitation: acts of God; inclement weather; floods;
accidents; strikes; lockouts; fires; wars; equipment failures; labor disputes;
labor shortages; riots; demonstrations; sabotage; laws, ordinances, rules,
regulations, standards or decrees of governmental or other authorities, whether
valid or invalid (including, without limitation, import or export prohibitions
or priorities, requisitions, allocations and price adjustment restrictions);
inability to obtain or unavoidable delay in obtaining necessary power,
materials, facilities, services or equipment; interruption or unavoidable delay
in communication or transportation; or any other similar or dissimilar
occurrence which could have a material adverse impact on the ability of UCAR to
perform hereunder. If UCAR fails to perform hereunder as a result of any
occurrence contemplated by the preceding sentence, UCAR shall (i) give written
notice to that effect to GRAPH-TECH within 10 days after such occurrence
together with a statement setting forth reasonably full particulars concerning
such occurrence and (ii) use reasonable efforts to remedy such occurrence as
quickly as possible. The requirement that such occurrence be so remedied shall
not require the settlement of strikes, lockouts or other labor difficulties. To
the extent required by any such occurrence, the performance by both parties
hereunder shall be suspended during the continuance of any such occurrence (but
for no longer period) and this Agreement shall otherwise remain unaffected. If
at any time during the term of this Agreement such occurrence is remedied, UCAR
shall promptly notify GRAPH-TECH and any such suspension shall end.
SECTION 10 - CONFIDENTIALITY
10.1 All confidential or proprietary data, reports, records and
other information of any kind received by GRAPH-TECH or the affiliates,
shareholders, directors, officers, employees, partners, agents, attorneys,
accountants, representatives or consultants of GRAPH-TECH from UCAR or the
shareholders, directors, officers, employees, partners, agents, attorneys,
accountants, representatives or consultants of UCAR under this Agreement or in
connection with the transactions contemplated hereby shall be treated as
confidential (collectively, "Confidential Information"). Except as otherwise
provided herein, GRAPH-TECH shall not use (and shall not permit its affiliates,
shareholders, directors, officers, partners, employees, agents, attorneys,
accountants, representatives or consultants to use) Confidential Information for
its own (or their own) benefit and shall use all reasonable efforts (and shall
cause its affiliates, shareholders, partners, directors, officers, employees,
agents, attorneys, accountants, representatives and consultants to use all
reasonable efforts) to maintain the confidentiality of Confidential Information.
If GRAPH-TECH or any of its affiliates, shareholders, directors, officers,
partners, employees, agents, attorneys, accountants, representatives or
consultants is required to disclose Confidential Information by or to any court,
any government or any governmental agency, authority or instrumentality,
GRAPH-TECH shall, prior to such
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disclosure, immediately notify UCAR of such requirement and all particulars
related to such requirement. UCAR shall have the right, at its expense, to
object to such disclosure and to seek confidential treatment of any Confidential
Information to be so disclosed on such terms as it shall determine.
10.2 The restrictions set forth in Section 10.1 hereof shall not
apply to the use or disclosure of Confidential Information to the extent, but
only to the extent, (i) permitted or required pursuant to any other agreement
between the Parties, (ii) necessary by GRAPH-TECH in connection with exercising
its rights or performing its duties or obligations under this Agreement or the
other agreements described in clause (i) of this sentence, (iii) contemplated by
the last 2 sentences of Section 10.1 hereof or (iv) that GRAPH-TECH can
demonstrate such Confidential Information (A) is or becomes generally available
to the public through no fault or neglect of GRAPH-TECH, (B) is received in good
faith on a non-confidential basis from a third party who discloses such
Confidential Information without violating any obligations of secrecy or
confidentiality, (C) is independently developed after the time of receipt as
shown by dated written records or (D) was already possessed at the time of
receipt as shown by prior dated written records. The restrictions set forth in
Section 10.1 hereof shall not apply to the use or disclosure by GRAPH-TECH of
Confidential Information which relates to the Business or the Assets (as such
terms are defined in the Transfer Agreement between GRAPH-TECH and UCAR
effective January 1, 2000.
SECTION 11 - NOTICES
All notices required or permitted to be given pursuant to this
Agreement shall be given in writing, shall be transmitted by personal delivery,
by registered or certified mail, postage prepaid, or by telecopier and shall be
addressed as follows:
When GRAPH-TECH is the intended recipient:
UCAR Graph-Tech
11709 Lakewood Avenue
Lakewood, Ohio, 44107
Attention: President
Telecopy No.: (216) 529-3888
When UCAR is the intended recipient:
UCAR Carbon Company Inc.
3102 West End Avenue, Suite 1100
Nashville, Tennessee 37203
Attention: General Counsel
Telecopy No.: (615) 760-7785
A Party may designate a new address to which notices required or permitted to be
given pursuant to this Agreement shall thereafter be transmitted by giving
written notice to that effect to the other Party. Each notice transmitted in the
manner described in this Section 12 shall be deemed
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<PAGE> 6
to have been given, received and become effective for all purposes at the time
it shall have been (i) delivered to the addressee as indicated by the return
receipt (if transmitted by mail), the affidavit of the messenger (if transmitted
by personal delivery) or the telecopier generated confirmation (if transmitted
by telecopier) or (ii) presented for delivery to the addressee as so indicated
during normal business hours, if such delivery shall have been refused for any
reason.
SECTION 12 - GOVERNING LAW; FORUM
The validity, interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Ohio (without
giving effect to the laws, rules or principles of the State of Ohio regarding
conflicts of laws). Each Party agrees that any proceeding arising out of or
relating to this Agreement or the breach or threatened breach of this Agreement
shall be commenced and prosecuted in a state court in the State of Ohio. Each
Party consents and submits to the non-exclusive personal jurisdiction of any
such court in respect of such proceeding. Each Party consents to service of
process upon it with respect to any such proceeding by registered mail, return
receipt requested, and by any other means permitted by applicable laws and
rules. Each Party waives any objection that it may now or hereafter have to the
laying of venue of any such proceeding in any such court and any claim that it
may now or hereafter have that any such proceeding in any such court has been
brought in an inconvenient forum. Each Party waives any right to trial by jury
in any such proceeding.
SECTION 13 - BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES
This Agreement shall be binding upon the Parties and their
respective successors and assigns and shall inure to the benefit of the Parties
and their respective successors and permitted assigns. Neither Party shall
assign any of its rights or delegate any of its duties under this Agreement (by
operation of law or otherwise) without the prior written consent of the other
Party. Any assignment of rights or delegation of duties under this Agreement by
a Party without the prior written consent of the other Party (if required) shall
be void. No person (including, without limitation, any employee of a Party)
shall be, or be deemed to be, a third party beneficiary of this Agreement.
SECTION 14 - ENTIRE AGREEMENT
This Agreement together with the Schedule attached hereto
constitutes the entire contract among the Parties with respect to the subject
matter hereof and cancels and supersedes all of the previous or contemporaneous
contracts, representations, warranties and understandings (whether oral or
written) by, between or among the Parties with respect to the subject matter
hereof.
SECTION 15 - AMENDMENTS
No addition to, and no cancellation, renewal, extension,
modification or amendment of, this Agreement shall be binding upon a Party
unless such addition, cancellation, renewal, extension, modification or
amendment is set forth in a written instrument which states that it adds to,
amends, cancels, renews, extends or modifies this Agreement and which is
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executed and delivered on behalf of each Party by an officer of such Party.
SECTION 16 - WAIVERS
No waiver of any provision of this Agreement shall be binding
upon a Party unless such waiver is expressly set forth in a written instrument
which is executed and delivered on behalf of such Party by an officer of such
Party. Such waiver shall be effective only to the extent specifically set forth
in such written instrument. Neither the exercise (from time to time and at any
time) by a Party of, nor the delay or failure (at any time or for any period of
time) to exercise, any right, power or remedy shall constitute a waiver of the
right to exercise, or impair, limit or restrict the exercise of, such right,
power or remedy or any other right, power or remedy at any time and from time to
time thereafter. No waiver of any right, power or remedy of a Party shall be
deemed to be a waiver of any other right, power or remedy of such Party or
shall, except to the extent so waived, impair, limit or restrict the exercise of
such right, power or remedy.
SECTION 17 - REMEDIES LIMITED
The sole and exclusive rights, powers and remedies of
GRAPH-TECH, other than such injunctive or other equitable remedies as may be
available to GRAPH-TECH, for a breach of or default under this Agreement by UCAR
shall be termination under Section 2 hereof or refund of Fees paid, as limited
in Section 7 hereof.
SECTION 18 - HEADINGS; COUNTERPARTS
The headings set forth in this Agreement have been inserted for
convenience of reference only, shall not be considered a part of this Agreement
and shall not limit, modify or affect in any way the meaning or interpretation
of this Agreement. This Agreement may be signed in any number of counterparts,
each of which (when executed and delivered) shall constitute an original
instrument, but all of which together shall constitute one and the same
instrument. This Agreement shall become effective and be deemed to have been
executed and delivered by both of the Parties at such time as counterparts shall
have been executed and delivered by each of the Parties, regardless of whether
each of the Parties has executed the same counterpart. It shall not be necessary
when making proof of this Agreement to account for any counterparts other than a
sufficient number of counterparts which, when taken together, contain signatures
of all of the Parties.
SECTION 19 - SEVERABILITY
If any provision of this Agreement shall be held to be invalid,
unenforceable or illegal, in whole or in part, in any jurisdiction under any
circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal while preserving the intent of the Parties as expressed in, and the
benefits to the Parties provided by, this Agreement or (ii) if such provision
cannot be so reformed, such provision shall be severed from this Agreement and
an equitable adjustment shall be made to this Agreement (including, without
limitation, addition of necessary further provisions to this Agreement) so as to
give effect to the intent as so expressed and the benefits so provided. Such
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holding shall not affect or impair the validity, enforceability or legality of
such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or impair
the legality, validity or enforceability of any other provision of this
Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the Parties have duly executed and delivered
this Agreement as of the date first above written.
UCAR CARBON COMPANY INC.
By: /s/ Karen G. Narwold
-----------------------------------
Name: Karen G. Narwold
Title: Vice President
UCAR GRAPH-TECH INC.
By: /s/ John J. Wetula
-----------------------------------
Name: John J. Wetula
Title: President
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<PAGE> 10
SCHEDULE 1.1
Services to be Provided by
UCAR Carbon Company Inc.
to UCAR GRAPH-TECH Inc.
SERVICES: For a term of five (5) years beginning on the date of this Agreement
UCAR shall provide the following Services:
1. Site Services
UCAR shall make the facilities in UCAR's Parma, Ohio facility
previously utilized by UCAR to conduct the Business available to
GRAPH-TECH for use by GRAPH-TECH in its conduct of all manner of
research and product development as well as the production of natural,
acid-treated and flexible graphite products (the "Business").
GRAPH-TECH shall have full use of the space identified on the attached
Exhibit "A". GRAPH-TECH shall not be moved from the space identified
without its prior written consent. The Site Services shall include:
- the use of approximately 1,872 sq. ft. of office space, as
designated on the attached Exhibit "A"
- the use of approximately 5,160 sq. ft. of laboratory space, as
designated on the attached Exhibit "A"
- the use of approximately 864 sq. ft. of storage space, as
designated on the attached Exhibit "A"
- the use of all common areas, restrooms, cafeteria,
non-exclusive parking spaces, specialized laboratory
facilities and conference rooms (specialized laboratory
facilities and conference rooms as available or scheduled in
advance)(4,000 sq. ft. allocated for purposes of rent
calculation)
- all utilities including electricity, sewer, natural gas, HVAC,
potable and distilled water, compressed air, nitrogen, argon,
oxygen, steam and local telephone
- shipping and receiving
- plant emergency response
- mail distribution
- custodial and janitorial services
- duplicating, fax machines and related office services
- use of the cafeteria (subsidy included in rent)
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- guard and security services
- waste hauling services
- computer services including local area network (LAN) and
support
- new or used office furniture in good condition and existing
lab equipment
The Rent for the Site Services shall billed at the following
rates:
<TABLE>
<S> <C>
Office and Lab Space $ 18.25 per square foot of occupied space
Storage Space $ 5.00 per square foot of occupied space
</TABLE>
The Quarterly Rent for year 2000 based on the area assigned
above shall be:
<TABLE>
<S> <C> <C>
January 1, 2000 - December 31, 2000: $ 51,413.50 per quarter
</TABLE>
Because of future expansions of GRAPH-TECH's Business,
GRAPH-TECH, from time to time, may request the use of additional space
within the facility. Upon receipt of a request, UCAR shall use its best
efforts to satisfy GRAPH-TECH's space requirements within UCAR's
existing vacant space. Any additional space will be billed at the rates
set out above.
2. Research and Development Services
UCAR shall provide the same level of research and development support
as existed prior to transfer of the business. Research shall include
the equivalent of one full time researcher and administrative support
for both the UCAR and GRAPH-TECH research personnel. Development shall
include consultation by the Director of the Technical Center and such
personnel necessary for the continued protection, maintenance and
prosecution of patents, patent applications and other intellectual
property/ideas generated at the site. For these services GRAPH-TECH
shall pay a flat fee of $60,500.00 per quarter.
3. Site Health, Safety and Environmental Services ("HS&EP
Services")
UCAR shall provide the same level of Health Safety and Environmental
support services as were previously provided to the Business. The HS&EP
Services shall include, among other services, full time support of site
HS&EP personnel, the chemical inventory system and hazardous waste
disposal. The facility shall provide at the site the services of a
nurse and doctor, which shall be made available for all GRAPH-TECH
personnel. GRAPH-TECH shall pay a fee in the amount of $10,000.00 per
quarter for these services.
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4. Stores Services
UCAR shall provide a company store fully stocked with products and
materials necessary for the operation of the Business at least to the
same level as existed prior to the transfer of the Business. GRAPH-TECH
shall pay a fee in the amount of $1,400.00 per quarter for these
services.
5. Human Resource Services ("HR Services")
UCAR shall provide the same level of HR Services as were previously
provided to the Business and the GRAPH-TECH personnel located at the
facility. HR Services shall include, among other services, all
necessary site and corporate training, site payroll and benefit
support, full-time support of facility HR staff and employee
activities. GRAPH-TECH shall pay a fee in the amount of $5,250.00 per
quarter for these services.
6. T.I.S. Services
UCAR shall provide the same level of HR Services as were previously
provided to the Business and the GRAPH-TECH personnel located at the
facility. TIS Services shall include, among other services, fully
updated technical library and related services, subscriptions and
online services. GRAPH-TECH shall pay a fee in the amount of $7,500.00
per quarter for these services.
7. Per Use Services
UCAR shall provide the same level of Per Use Services as were
previously provided to the Business and the GRAPH-TECH personnel
located at the facility. Those Per Use Services shall include and be
billed to GRAPH-TECH as follows:
Analytical and Microscopy $ 87.64 per hour
Physical Testing $ 76.72 per hour
Pilot Plant with UCAR Technician $ 90.60 per hour
Pilot Plant with GRAPH-TECH Technician $ 60.24 per hour
High Temperature Cure Furnace $1,560.00 per full load
The Per Use Services shall be provided on a first-come/first serviced
basis. Requests for Services by GRAPH-TECH shall be given equal
priority among all such requests.
REIMBURSEMENT OF ACTUAL COSTS GRAPH-TECH shall reimburse UCAR for all actual
costs incurred related to the Services. UCAR shall provide with each quarterly
invoice an itemization of reimbursable expenses along with supporting
documentation. Reimbursable expenses shall include those expenses that would not
normally be covered with the service and
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which are solely related to the services to the provision of services to
GRAPH-TECH including toll telephone charges, travel and other related expenses.
INCREASE IN RENT/FEES UCAR may increase the Rent and or Fees each year to
reflect actual increases in UCAR's operating costs for the facilities used by
GRAPH-TECH. UCAR may increase the rent by a percentage not to exceed the lesser
of the maximum increase charged to other tenants in the Site or five percent
(5%).
RIGHT TO AUDIT During UCAR's normal business hours for the duration of this
Agreement, and for a period of one (1) year thereafter, GRAPH-TECH shall have
access to such books and to all other records of UCAR as required to verify any
and all increases in UCAR operating costs for the facility and/or actual costs
reimbursed by GRAPH-TECH.
DISCONTINUANCE/EXTENSION OF SERVICES GRAPH-TECH, in its sole discretion, may
discontinue any of the Services in whole or in part and may relocate and move
the GRAPH-TECH Business and all of GRAPH-TECH's assets from the UCAR facilities.
GRAPH-TECH shall have the right to extend this Agreement and its use of the
facilities in one-year increments for the period through December 31, 2009;
provided, however, that UCAR may refuse to grant an extension in the event that
UCAR sells or otherwise transfers the Parma, Ohio facility. GRAPH-TECH's right
to extension may be exercised by providing written notice to UCAR at least 10
days prior to the expiration of the term.
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<PAGE> 1
Exhibit 10.6
EMPLOYEE BENEFITS SERVICES AND LIABILITIES AGREEMENT
Following the transfer of the Natural and Flexible Graphite Products
business of UCAR Carbon Company Inc. and its subsidiaries, ("UCAR") to UCAR
Graph-Tech Inc. ("Graph-Tech") pursuant to a Transfer Agreement between UCAR and
Graph-Tech (the "Transfer Agreement"), which transfer was effective as of
January 1, 2000, (the "Closing Date"), UCAR will maintain certain employee
benefits functions on behalf of Graph-Tech and Graph Tech's subsidiaries. This
Agreement sets forth the parties' understanding of that arrangement.
1. As used herein, the term "Services shall mean the services
described in Annex A attached hereto, which services will be
provided by UCAR to Graph-Tech and Graph-Tech's subsidiaries
hereunder with respect to the employee benefit plans listed in
Annex B attached hereto (collectively, the "Plans"). The
Services and the Plans may be added to, terminated or modified
from time to time by UCAR in its discretion.
2. The type, quality and manner of performance of the Services
will be the same as the type, quality and manner of
performance of services provided to Graph-Tech's businesses
prior to the Transfer; provided, however, that the parties
recognize that in some cases the practices, procedures and
methods followed in connection with providing comparable
services prior to the Transfer will have to be modified in
order to provide the Services.
3. Graph-Tech will pay UCAR monthly for the Services in
accordance with Annex C attached hereto.
4. In addition to the monthly payments, Graph-Tech will pay to
UCAR an amount equal to Graph-Tech's share of monthly costs
with respect to the Plans. Such costs shall be determined in
accordance with the current standard practices, policies and
procedures of UCAR. Graph-Tech's share of such costs shall be
determined on the same basis on which the share of such costs
is determined for all other business units of UCAR. The
present policies, practices and procedures for determining
such costs
1
<PAGE> 2
and the present basis for allocating such costs among business
units of UCAR are set forth in Annex D attached hereto. In the
event that, by mutual agreement of the parties, Graph-Tech's
obligation to make payments under this paragraph is
terminated, Graph-Tech shall nonetheless continue to be
obligated to pay UCAR in accordance with paragraph 3.
5. UCAR will compute the payments due in accordance with
paragraph 3 and the payments due in accordance with paragraph
4 and will invoice Graph-Tech monthly. Payment will be due
within thirty (30) days of receipt of the invoices.
6. This agreement shall be deemed to commence as of January 1,
2000 and will continue in force on the terms and conditions
described herein until terminated by mutual agreement of the
parties.
7. Notwithstanding anything to the contrary contained in the
Corporate Services Agreement dated as of January 1, 2000 by
and between the parties hereto (the "Service Agreement"), UCAR
shall continue to provide and Graph-Tech shall continue to
accept and pay for Payroll and Related Services under the
Service Agreement while Services are being provided hereunder.
8. THERE ARE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE
SERVICES TO BE PROVIDED HEREUNDER AND NO REPRESENTATION OR
WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW,
INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AS TO THE
SERVICES.
9. UCAR shall act, and shall be deemed to act, as an independent
contractor, and not as an agent, partner or joint venturer, in
connection with the Services.
10. In addition to any other amounts payable hereunder, Graph-Tech
shall promptly reimburse UCAR for any taxes, excises, imposts,
duties, levies, withholdings or other similar charges
(excepting any taxes, excise, imposts, duties, levies,
withholdings or charges based on net income) that may be
required to be paid on account of the Services; provided,
however, that no such reimbursement shall be made to the
extent any of the foregoing have been included in the
calculation of the compensation due
11. Receipt of any Service hereunder shall constitute an
unqualified acceptance of the Service and a waiver of any and
all claims with respect to such Service unless UCAR receives
written notice of such claims within sixty (60) days after
receipt of Service. In the case of failure to provide
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<PAGE> 3
any Service, any and all claims with respect to such Service
shall be waived unless written notice of such claims is
received by UCAR within sixty (60) days after the date on
which such Service was first required to be provided. No claim
resulting from the breach hereunder as to any Service provided
or for failure to provide or delay any Service shall be
greater in amount than the charge for that portion of the
Service in respect of which such claim is made, and in no
event will UCAR or its subsidiaries or affiliates (other than
Graph-Tech and Graph-Tech's subsidiaries) be liable to
Graph-Tech or Graph-Tech's subsidiaries or affiliates for any
special, indirect, incidental or consequential damages or any
lost profits, whether based on negligence, strict liability in
tort or breach of warranty or on any other basis.
12. UCAR shall not be liable for its failure to perform hereunder
to the extent that its performance is made impracticable,
delayed or prevented, in whole or in part, due to any
occurrence beyond its reasonable control, including without
limitation: acts of God; inclement weather; floods; accidents;
strikes; lockouts; fires; wars; equipment failures; labor
disputes; labor shortages; riots; demonstrations; sabotage;
laws, ordinances, rules, regulations, standards or decrees of
governmental or other authorities, whether valid or invalid
(including, without limitation, import or export prohibitions
or priorities, requisitions, allocations and price adjustments
restrictions); inability to obtain or unavoidable delay in
obtaining necessary power, materials, facilities, services or
equipment; interruption or unavoidable delay in communication
or transportation; or any other occurrence which could have a
material adverse impact on the ability of UCAR to perform
hereunder. If UCAR fails to perform hereunder as a result of
any occurrence described in the preceding sentence, UCAR shall
(i) give written notice to that effect to Graph-Tech promptly
after an occurrence together with a statement setting forth
reasonably full particulars concerning such occurrence and
(ii) use reasonable efforts to remedy the occurrence as
quickly as possible. The requirement that such occurrence be
so remedied shall not require the settlement of strikes,
lockouts or other labor difficulties. To the extent required
by any such
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<PAGE> 4
occurrence, the performance by UCAR hereunder shall be
suspended during the continuance of any such occurrence (but
for no longer period) and this agreement shall otherwise
remain unaffected. If at any time during the term of this
agreement such occurrence is remedied, UCAR shall promptly
notify Graph-Tech and any such suspension shall end.
13. Each party agrees to refrain and to cause its subsidiaries and
affiliates to refrain from use in any manner, and to use
reasonable efforts to keep confidential and to cause its
subsidiaries and affiliates to use reasonable efforts to keep
confidential, any and all information and data concerning the
business and affairs of the other party or its subsidiaries or
affiliates received as a result of this agreement, except to
the extent that such party can demonstrate that the
information or data (i) is generally available to the public
as evidenced by prior written publication through no act or
failure to act by it or its subsidiaries or affiliates, (ii)
was already known to its or its subsidiaries or affiliates on
a non-confidential basis on the date of receipt as evidence by
written and dated records made by it or its subsidiaries or
affiliates prior to the date hereof, (iii) is independently
developed by Graph-Tech without reference to any information
provided by UCAR, or (iv) is subsequently disclosed to it or
its subsidiaries of affiliates on a non-confidential basis by
a third party not having a confidential relationship with such
other party or its subsidiaries or affiliates with respect to
such information. Notwithstanding the foregoing, each of the
parties and their subsidiaries and affiliates shall be free to
disclose any such information or data to the extent, buy only
to the extent, (i) required by applicable law or by a
government in a duly authorized investigation or (ii)
necessary to establish a position in any litigation or any
arbitration or other proceeding based upon on in connection
with the subject matter of this agreement. Prior to any
disclosure pursuant to the preceding sentence, the disclosing
party shall give reasonable prior notice to the other party of
such intended disclosure and, if requested by such other
party, shall use all reasonable efforts to obtain a protective
order or similar protection for such other party. Neither
Graph-Tech nor any of Graph-Tech's subsidiaries shall be
deemed to be subsidiaries of UCAR for the purposes of this
paragraph.
14. This agreement shall be binding upon, and inure to the benefit
of, the parties and their respective successors and permitted
assigns. Except as otherwise expressly provided herein,
nothing contained herein shall be deemed to create any
third-party beneficiary rights in any individual who or entity
which is not a party to this agreement. Any assignment or
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<PAGE> 5
delegation of this agreement by either party without the prior
written consent of the other party shall be void, except that
no such consent shall be required with respect to an
assignment or delegation made in connection with the sale,
transfer or other disposition of all or substantially all of
the businesses of either party or to an affiliate of the
party. This agreement shall survive the transfer by UCAR or
any or all of its direct or indirect interests in Graph-Tech.
15. The validity, interpretation and performance of this agreement
shall be governed by and construed in all respects in
accordance with the law of the State of Delaware, without
reference to its conflicts of laws rules or principles.
16. This agreement and the Annexes attached hereto constitute the
entire understanding of the parties concerning the Services to
be provided hereunder and cancels and supercedes all previous
agreements and understandings, oral or written, between the
parties with respect to the subject matter hereof. This
agreement constitutes one of the "Service Agreements" referred
to in Article 1.3 of Transfer Agreement. No modification of
this agreement or waiver of any provision hereof or right
hereunder will be binding upon either party unless signed in
writing by an authorized representative of such party.
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<PAGE> 6
If the above correctly reflects your understanding respecting
this matter, please so signify by having your authorized representative
sign below.
UCAR Carbon Company Inc.
By: /s/ Karen G. Narwold
----------------------------------------
Name: Karen G. Narwold
Title: Vice President
Agreed and Accepted:
UCAR Graph-Tech Inc.
By: /s/ John J. Wetula
-----------------------------
Name: John J. Wetula
Title: President
6
<PAGE> 7
Annex A: Services
A. Benefit Plans Administration
Design and recommend plans for management and Board approval as
appropriate, and administer/monitor all Corporate Benefit plans. This
includes the Health Care Plans, Pension Plan, Savings Plan, Life
Insurance and numerous other formal benefit plans. Corporate Benefit
Plans will also provide Retiree Services to all Graph-Tech retirees.
B. Corporate Relocation
Provide services to employees being transferred, new hires and
temporary assignees by providing relocation counseling, transfer policy
information, relocation management contacts (appraisals, realtors,
mortgage lenders, etc.) through Prudential Relocation Management.
Performs invoice audits. Processes reimbursements for relocation
expenses.
C. Benefit Plans Operations
Processes, maintains and forwards to carriers, monthly, all
enrollments, changes and terminations for the following plans: Basic
Group Life, Medical, Dental, Major Medical, Retiree Medical, Medicare
Supplement Plan (MMMSP - age 65 and over) and Long Term Disability.
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<PAGE> 8
Performs Savings Program processing functions, which include:
before-tax and after-tax enrollments.
Performs Pension Operations services, including calculating pension
benefits, and data maintenance.
Performs Accounting and Control functions, including recordkeeping,
billing and financial analysis of benefit plans.
8
<PAGE> 9
Annex B: Plans
A. Pension Plans
- Qualified Plans:
- UCAR Carbon Retirement Plan
- UCAR Carbon Savings Plan
- Non-Qualified Plans:
- UCAR Carbon Supplemental Retirement Income Plan
- UCAR Carbon Enhanced Retirement Income Plan
- UCAR Carbon Equalization Benefit Plan
B. Savings Plans
- UCAR Carbon Savings Plan
C. Medical Plans (including Retiree Medical Plans)
- UCAR Carbon Medical Plan
- UCAR Carbon Retiree Medical Plan
- UCAR Carbon Medicare Supplement Plan
D. Dental Plans
- UCAR Carbon Dental Assistance Plan
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<PAGE> 10
E. Life Insurance/Disability Plans
- UCAR Carbon Basic Life Insurance Plan
- UCAR Carbon Long Term Disability Plan
- UCAR Carbon Business Travel Accident Plan
F. Other Plans
- UCAR Carbon Employee Assistance Program
- UCAR Educational Refund Program
- UCAR Carbon Cafeteria Plan
- UCAR Health and Dependent Care Reimbursement Account Plan
- UCAR Student Loan Program
G. Corporate Relocation Services
- Corporate Homesale Agreement (Prudential Relocation
Management, Inc.)
- Relocation Consulting Services Agreement
- Prudential Mortgage Services Agreement
H. Other Direct Billings
- UCAR Bonus Plan (businesses' portion as directly identified)
- Financial Counseling Program (businesses' portion as directly
identified)
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<PAGE> 11
Annex C: Method of Payment for Services
A. Benefit Plans Operations and Administration
Collection of costs is performed through a series of budget centers. At
the beginning of each year, an allocation schedule is prepared for each
of the individual budget centers which identifies how the actual costs
incurred for that year are to be distributed to each of the various
elements of Employees Plans Expense ("EPE"). Such identification is
done on the basis of estimated time and effort or other logical basis
of estimated costs to be incurred.
Each month, the actual costs incurred in each of the applicable budget
centers are distributed as per the annual schedule and entitled
Departmental Administration. This Departmental Administration is then
incorporated as a part of each element of Employee Plans Expense by
Benefit Plans Accounting, and a proportionate share is allocated to
each of the business units which receive that applicable element of
EPE. The method of charging each business unit for EPE is covered in
Annex D.
B. Corporate Relocation Services
Annually, a series of fixed-rate fees are established which are
estimated to cover the total cost of operating the Corporate Relocation
Department based on the
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<PAGE> 12
number of transferees, new hires and temporary relocations estimated to
be administered in that year. Each transfer authorization/temporary
assignment authorization processed generates a charge to the
business/location to which the employee is being transferred. These
charges, together with any associated actual costs of the Transfer
Assistance Program and its related agreements and income tax gross-up
procedure, are billed monthly as incurred.
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<PAGE> 13
ANNEX D: METHOD OF DETERMINATION AND ALLOCATION OF EMPLOYEE PLANS EXPENSES
The costs of these services will be assigned, allocated and billed based upon
methods/procedures used to bill other businesses within UCAR. The objective is
to have each business pay for its fair share of the total Benefit Plans Costs.
Pension costs consist of expenses determined under FAS 87 (actuarial valuations)
plus administration cost associated with the pension plans (including qualified
and non-qualified plans). Pension costs will be allocated to Graph-Tech prorata
based upon total straight time earnings of its employees.
Savings plan costs (Company share) consist of expenses incurred based upon
UCAR's matching contribution to the Savings plan plus administration cost
associated with the savings plan. Savings plan costs will be allocated to
Graph-Tech prorata based on the same percentage as the actual basic savings
deductions of its employees.
Active Medical costs consist of claims, administration costs associated with the
medical plan, adjustments to reserves, and reductions due to employee
contributions. Active medical costs will be allocated to Graph-Tech prorata at
the same percentage of Graph-Tech participants over total active participants in
the medical plan.
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<PAGE> 14
Retiree Medical costs consist of expenses determined under FAS 106 (actuarial
valuations) and administration costs associated with the retiree medical plan.
Retiree medical costs will be allocated to Graph-Tech prorata based on active
headcount.
Group Life insurance costs consist of premiums paid to insurance providers,
administration costs associated with the insurance plan, and reductions due to
employee contributions. Group life insurance costs will be allocated to
Graph-Tech, prorata based on straight time earnings of all basic group life
insurance participants.
Dental costs consist of claims and administration costs associated with the
dental plan. Dental costs will be allocated to Graph-Tech prorata based on total
active headcount.
Employee assistance plan consists of fees to administer the plan. Employee
assistance costs will be allocated to Graph-Tech prorata based on total active
headcount.
Long Term disability cost consist of premiums paid to insurance providers,
administration costs associated with the insurance plan, and reductions due to
employee contributions. Long Term disability costs will be allocated to
Graph-Tech prorata based on straight time earnings of all long term disability
participants.
Other Medical costs consist of HMO premiums for participants who are in the
various HMOs. HMO costs will be allocated to Graph-Tech prorata based on active
headcount
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<PAGE> 15
within the HMO.
Educational refund costs consist of cost to send employees to further their
education (fees, books, etc.) Educational refund costs will not be allocated,
but rather collected at corporate and charged as a part of the General Services
provided to Graph-Tech.
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<PAGE> 1
Exhibit 10.7
ASSUMPTION OF THE
UCAR CARBON RETIREMENT PLAN
BY UCAR GRAPH-TECH INC.
1. Assumption by UCAR Graph-Tech Inc. Subject to the consent
of UCAR Carbon Company Inc., and pursuant to a resolution by the Board of
Directors of UCAR Graph-Tech Inc. ("Corporation") dated December 31, 1999, the
Corporation does hereby adopt and assume, jointly and severally, the obligations
of UCAR Carbon Company Inc. under the UCAR Carbon Retirement Plan ("Retirement
Plan"), and the trust agreement, dated as of October 28, 1992, between UCAR
Carbon Company Inc. and Mellon Bank, N.A. established in connection with the
Retirement Plan ("Trust Agreement"), and hereby appoints UCAR Carbon Company
Inc. as its agent and attorney in fact for all purposes with respect to the
Retirement Plan and the Trust Agreement, including amending or terminating the
Retirement Plan and Trust Agreement and giving or receiving notices,
instructions, directions and other communications to the Trustee.
Signed this 31st day of December, 1999.
UCAR GRAPH-TECH INC.
By: /s/ John J. Wetula
---------------------------------
<PAGE> 1
Exhibit 10.8
ASSUMPTION OF THE
UCAR CARBON SAVINGS PLAN
BY UCAR GRAPH-TECH INC.
1. Assumption by UCAR Graph-Tech Inc. Subject to the consent
of UCAR Carbon Company Inc., and pursuant to a resolution by the Board of
Directors of UCAR Graph-Tech Inc. ("Corporation") dated December 31, 1999, the
Corporation does hereby adopt and assume, jointly and severally, the obligations
of UCAR Carbon Company Inc. under the UCAR Carbon Savings Plan ("Savings Plan"),
and the trust agreement, dated as of December 31, 1997, between UCAR Carbon
Company Inc. and Vanguard Fiduciary Trust Company established in connection with
the Savings Plan ("Trust Agreement"), and hereby appoints UCAR Carbon Company
Inc. as its agent and attorney in fact for all purposes with respect to the
Savings Plan and the Trust Agreement, including amending or terminating the
Savings Plan and Trust Agreement and giving or receiving notices, instructions,
directions and other communications to the Trustee.
Signed this 31st day of December, 1999.
UCAR GRAPH-TECH INC.
By: /s/ John J. Wetula
<PAGE> 1
Exhibit 10.9
TAX ALLOCATION AGREEMENT
AGREEMENT made as of January 1, 2000, between UCAR International Inc.,
a Delaware corporation ("UCAR"), and UCAR Graph-Tech Inc., a Delaware
corporation ("Graph-Tech").
WHEREAS, UCAR's subsidiary, UCAR Carbon Company Inc. owns all of the
issued and outstanding shares of voting common stock of Graph-Tech; Graph-Tech
has is a member of an affiliated group within the meaning of Section 1504(a) of
the Internal Revenue Code ("Code") of which UCAR is the common parent
corporation (the "Group"); and UCAR proposes to include Graph-Tech in filing a
consolidated federal income tax return for the calendar years 1999 and
thereafter; and,
WHEREAS, UCAR and Graph-Tech wish to provide for allocating a portion
of the consolidated tax liability of the Group to Graph-Tech and for the payment
by Graph-Tech to UCAR of such allocated tax liability;
NOW, THEREFORE, UCAR and Graph-Tech agree as follows:
1. Consolidated Return Election. Graph-Tech (and any subsidiary of
Graph-Tech that is eligible to be included in such a return) will join in the
filing of a consolidated federal income tax return for the calendar year 1999
and for any subsequent taxable period for which the Group is required or
permitted to file such a return. Graph-Tech, on its own behalf and on behalf of
any eligible subsidiary, agrees to file such consents, elections and other
documents and take such other action as may be necessary or appropriate to carry
out the purpose of this Section. UCAR also agrees to take such action as may be
necessary or appropriate to carry out the purpose of this Section. Any
<PAGE> 2
period for which Graph-Tech and its eligible subsidiary is included in a
consolidated federal income tax return filed by UCAR shall be referred to in
this Agreement as a "Graph-Tech Consolidated Return Year."
2. Graph-Tech Liability to UCAR. UCAR shall be responsible for making
determinations with respect to the Group's consolidated federal income tax
liability (including liability for estimated tax payments) and for preparing and
filing the returns. Following the end of each Graph-Tech Consolidated Return
Year, UCAR will invoice Graph-Tech and any eligible subsidiary for their
respective tax liability. Graph-Tech and its eligible subsidiary shall promptly
pay to UCAR the amount (if any) of federal income taxes for which Graph-Tech and
its eligible subsidiary are liable for that year. Graph Tech's and its'
subsidiaries tax liability shall be computed as an amount equal to Graph-Tech's
or the subsidiary's current liability for federal income taxes set out in its
financial statements.
3. Interim Estimated Payments. During any Graph-Tech Consolidated
Return Year, Graph-Tech and its eligible subsidiary shall pay to UCAR such
amounts as UCAR may request so as to reimburse UCAR for that portion of any
estimated federal income tax payments made by UCAR for such Year which are
attributable to the inclusion of Graph-Tech or any subsidiary of the Group.
Graph-Tech and/or its subsidiary as the case may be shall make the foregoing
payments promptly after receiving a request for payment from UCAR. Any amounts
so paid by UCAR or its subsidiary in any such Year shall be applied against the
final amount payable to UCAR for such year pursuant to Section 2 above. If the
aggregate payments made by Graph-Tech or its subsidiary for any such Year
pursuant to Section 2 exceed the amount of their final liability for such Year
as determined pursuant to Section 2, such excess shall be refunded by UCAR
promptly after UCAR files the final consolidated federal income tax return for
such Year.
4. Indemnity. UCAR agrees to indemnify and hold Graph-Tech and its
subsidiary harmless from and against any claims of liability for federal income
tax for any UCAR Consolidated Return Year up to the amount of any payments made
by Graph-Tech or its subsidiary to UCAR
<PAGE> 3
under this Agreement and for any interest on or penalties with respect to, any
such year.
5. Other Taxes. If UCAR or a member of the Group other than Graph-Tech
or its subsidiary files, or is required to file, combined or consolidated state,
local or foreign income or franchise tax returns which include Graph-Tech or its
subsidiary, the provisions of this Agreement shall apply to such returns.
6. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of, the parties and their affiliates and their respective
successors, legal representatives and assigns. Except as expressly provided
herein, nothing herein shall create or be deemed to create a third party
beneficiary rights in any person or entity not a party to this Agreement. No
assignment of this Agreement or of any rights or obligations hereunder may be
made by either party (by operation of law or otherwise) without the prior
written consent of the other party, and any such purported assignment without
such consent shall be null and void and of no effect.
7. Governing Law. This Agreement shall be governed by and construed in
all respects under the law of the State of Delaware, without reference to its
conflict of laws rules or principles.
8. Standards. UCAR shall perform its responsibilities hereunder with
reasonable care and diligence.
IN WITNESS WHEREOF, UCAR and Graph-Tech have executed this Agreement by
authorized officers thereof as of the date first above written.
UCAR International Inc.
By: /s/ Karen G. Narwold, V.P.
UCAR Graph-Tech Inc.
By: /s/ John J. Wetula, President
<PAGE> 1
Exhibit 10.10
LEASE AGREEMENT
BETWEEN
UCAR CARBON COMPANY INC.
"LANDLORD"
AND
UCAR GRAPH-TECH INC.
"TENANT"
January 1, 2000
<PAGE> 2
TABLE OF CONTENTS
Page No.
Lease Agreement 3
Article 1 Leased Premises 4
Article 2 Term of Lease 4
Article 3 Rent and Additional Rent 4
Article 4 Use 5
Article 5 Repairs and Maintenance 6
Article 6 Alterations 6
Article 7 Utilities, Services and Taxes 7
Article 8 Termination of Lease 9
Article 9 Signs and Property Loss 10
Article 10 Inspection by Landlord 10
Article 11 Assignment and Sub-Letting 11
Article 12 Indemnification and Insurance 14
Article 13 Default 15
Article 14 Fire and Casualty 17
Article 15 Condemnation 17
Article 16 Relationship of Parties 18
Article 17 Notices 19
Article 18 Covenant Against Liens; Subordination 19
Article 19 Condition of Premises 19
Article 20 Tenant's Certificate 20
Article 21 Force Majeure 22
Article 22 Quiet Enjoyment 23
Article 23 Waiver 23
Article 24 Memorandum of Lease 23
Article 25 Brokerage Fees 23
Article 26 Governing Law 24
Article 27 Holdover 24
Article 28 Successor Landlord 24
Article 29 Entire Agreement 25
Article 30 Option for Additional Space 25
Article 31 Right of First Refusal on Sale of the Property 26
Article 32 Landlord's Title 27
Article 33 Waiver of Lien 28
Article 34 Definition of Certain Terms 28
Article 35 Satellite Dish Lease 29
Article 36 FASB 13 29
Article 37 Disputes 30
Exhibit "A" 32
Exhibit "B" Services 36
2
<PAGE> 3
LEASE AGREEMENT
THIS AGREEMENT, made as of the 1st day of January, 2000, between UCAR
CARBON COMPANY INC., a Delaware corporation having offices at 3102 West End
Avenue, Suite 1100, Nashville, Tennessee, 37203, (hereinafter called
"Landlord"), and UCAR Graph-Tech Inc., a Delaware corporation having offices at
11709 Madison Avenue, Lakewood, Ohio, 44107 (hereinafter called "Tenant"),
WITNESSETH
WHEREAS, Landlord owns certain land, together with the buildings and
improvements located thereon, situated at West 117th Street and Madison Avenue,
City of Lakewood, County of Cuyahoga and State of Ohio (hereinafter called the
"Plant Site"); and
WHEREAS, part of the Plant Site comprising approximately 207,000 square
feet as more particularly described and shown in Exhibit A attached hereto
(hereinafter called the "Premises") is used in conjunction with Tenant's
natural, acid-treated and flexible graphite business; and
WHEREAS, Tenant wishes to lease the Premises in order to produce,
manufacture, store, transport and distribute natural, acid treated and flexible
graphite and related products;
NOW, THEREFORE, in consideration of the rents reserved hereunder and
the mutual undertakings hereinafter set forth, Landlord and Tenant hereby
covenant and agree as follows:
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<PAGE> 4
ARTICLE 1 - LEASED PREMISES
1.1 Landlord hereby leases to Tenant and Tenant hereby takes and
hires from Landlord, upon and subject to the terms, covenants,
conditions and provisions of this Agreement, the Premises,
together with (i) access to the Premises through the use of
access roads, parking areas, common hallways, loading docks
and other designated areas of the Plant Site adjoining the
Premises; (ii) use of the conference rooms, restrooms,
lunchrooms and locker rooms located upon the Plant Site by
Tenant's employees, agents, contractors and invitees, and
(iii) exclusive parking rights for up to 200 personal vehicles
in the various parking areas at the Plant Site. Any use or
exercise of the aforesaid access, use and parking rights shall
be subject to the indemnification and insurance obligations of
this Agreement.
1.2 Tenant's rights to the possession, occupation and use of the
Premises shall be subject to Landlord's exception and
reservation from the Premises of easement, access and other
necessary rights for any utility systems servicing the Plant
Site, whether now existing or hereafter installed upon the
Premises, including without limitation the right to maintain,
repair, replace, change the size of and remove.
ARTICLE 2 - TERM OF LEASE
2.1 The term of this Agreement shall commence on January 1, 2000,
and shall expire on December 31, 2010 unless extended or
sooner terminated as otherwise provided herein.
2.2 Tenant shall have the exclusive and irrevocable option to
extend the terms hereof for five additional periods of five
(5) years (the first extension commencing January 1, 2011 and
expiring December 31, 2015; the second extension commencing
January 1, 2016 and expiring December 31, 2020; the third
extension commencing January 1, 2021 and expiring December 31,
2025; the fourth extension commencing January 1, 2026 and
expiring December 31, 2030; the fifth extension commencing
January 1, 2031 and expiring December 31, 2035; each
individually referred to as the "Extended Term"), provided
that Tenant delivers to Landlord on or before the last day of
the then current term, written notice of its intention to so
extend the term. Any such extension shall be upon the same
terms and conditions as set forth herein, except as to the
extension option.
ARTICLE 3 - RENT AND ADDITIONAL RENT
3.1 During the term hereof, Tenant shall pay to Landlord rent
equal to:
Initial Term 1/1/2000 - 12/31/2010 $213,210.00 per year
payable at the rate of $53,302.50 per quarter
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1st Extension 1/1/2011-12/31/2015 $228,870.00 per year
payable at the rate of $55,965.00 per quarter
2nd Extension 1/1/2016-12/31/2020 $235,064.00 per year
payable at the rate of $58,766.00 per quarter
3rd Extension 1/1/2021-12/31/2025 $246,817.00 per year
payable at the rate of $61,704.25 per quarter
4th Extension 1/1/2026-12/31/2030 $259,158.00 per year
payable at the rate of $64,789.00 per quarter
5th Extension 1/1/2031-12/31/2035 $272,116.00 per year
payable at the rate of $68,029.00 per quarter
Without notice or demand, in advance on the first day of each
calendar quarter during the term hereof, without any setoff,
counterclaim or deduction for any reason whatsoever. The rent
for any partial period at the commencement or termination of
the term hereof shall be apportioned and payable on a per diem
basis.
3.2 During the term hereof, Tenant shall pay to Landlord as
Additional Rent, within ten (10) days after receipt of an
invoice, those charges for the respective Services (as defined
in Article 7.1) as shown on Exhibit B attached hereto.
Landlord reserves the right to adjust the charges from time to
time to reflect the actual fully absorbed costs for any
Services due to increased costs or Tenant's use thereof in
excess of 2000 annual budget projections. Upon written notice
from Landlord to Tenant, such revised additional rent shall
become due and payable in accordance with the provisions of
this Section.
3.3 The Rent and Additional Rent shall be apportioned and adjusted
on a per diem basis for any monthly period at the commencement
or termination of this Agreement and shall be payable as of
such dates.
ARTICLE 4 - USE
4.1 Tenant may use and occupy the Premises for the production,
storage, transportation, sale and distribution of carbon
and/or graphite, fuel cell, automotive, heat management, fire
protection and fluid sealing products and related products and
for any other lawful purpose incidental thereto, but for no
other purpose unless approved by Landlord. Tenant shall not
cause or permit any hazardous condition or nuisance to arise
or be maintained in, at or on the Premises.
4.2 In its occupation and use of the Premises, Tenant shall comply
fully with all applicable local, State and Federal laws,
ordinances, orders, directives, rules and regulations. Tenant
shall not by reason of its use of the Premises at any time
throughout the term of this Agreement violate or cause to be
violated any laws, ordinances, orders, directives or rules or
regulations of any local, State or Federal authorities having
jurisdiction over the Plant Site and the reasonable rules and
regulations of the carriers insuring the Premises, or the
Board of Fire Underwriters or their equivalent, and such
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compliance and observation shall be at Tenant's sole cost and
expense. Tenant shall indemnify and hold harmless Landlord
from any claims, damages, loss, liability and obligation due
to any violation of this Section.
4.3 Tenant shall not, without Landlord's consent, produce,
generate, emit, treat, recycle, store, bury or dispose of any
hazardous or toxic materials, substance or wastes upon the
Premises other than those normally generated in the Tenant's
business. If Federal, State or local regulations reduce the
amount of waste, which may be accumulated at the initial point
of generation, then Tenant shall comply with such
requirements.
4.4 In its occupation and use of the Premises, Tenant shall comply
at a minimum with any health, safety or operating regulations
imposed by law with respect to the various areas and buildings
comprising the Plant in order to facilitate the safe
occupation and use of the Plant.
4.5 There shall be no obligation to occupy or operate within the
Premises at any time.
ARTICLE 5 - REPAIRS AND MAINTENANCE
5.1 Tenant shall take good care of the Premises and, at its sole
cost and expense, shall keep and maintain the Premises in a
clean and orderly condition and perform all necessary or
required maintenance, repairs, and replacements. Tenant shall
not cause or permit any waste (other than reasonable wear and
tear), damage or disfigurement to the Premises, or any
overloading of the floors of the Premises.
ARTICLE 6 - ALTERATIONS; IMPROVEMENTS
6.1 The Tenant shall have the right to make alterations and
improvements from time to time without the written consent of
the Landlord, both structural and non-structural, including
additions thereto and demolition thereof, upon the conditions,
however, that following such alterations or improvements there
shall be no decrease of rental space or value of any building
upon the Premises or change in the general character of the
Plant Site and that such alterations or improvements shall
comply with all applicable zoning ordinances, building
regulations, relevant statutes, ordinances and requirements of
all federal, state and municipal departments, and the local
Board of Fire Underwriters.
6.2 Any alterations or improvements made under this Article shall
be made at the Tenant's sole cost and expense and Tenant shall
be entitled to any and all salvage. Landlord shall cooperate
with Tenant in any governmental applications or otherwise in
making said alterations and improvements, provided, however,
such cooperation shall be without cost or expense to Landlord.
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6.3 Tenant shall be entitled to any investment tax credit and for
depreciation on any equipment or other property placed by
Tenant in the Premises, or additions or replacements to the
building or the Premises made by Tenant. Landlord agrees to
execute any and all documents necessary to pass through to
Tenant the investment tax credit involved.
ARTICLE 7 - UTILITIES, SERVICES AND TAXES
7.1 Subject to and except as otherwise provided in Article 7.3:
(a) Landlord shall provide, or cause to be
provided, to the Premises those services in
the respective quantities and subject to the
specifications and limitations as set forth
in Exhibit B attached hereto (hereinafter
individually and collectively called the
"Services"). Pursuant to Article 3.2, Tenant
shall reimburse Landlord for the
fully-absorbed costs of providing the
Services based upon the charges as set forth
in Exhibit B.
(b) Landlord will provide, or cause to be
provided, the Services solely in conjunction
with the demise of the Premises and as
necessary in order to permit Tenant to enjoy
the full use and occupation thereof. Tenant
shall not make available or resell any
Services delivered hereunder to any other
party. The Services provided by Landlord, or
caused to be provided, shall not be deemed
evidence that Landlord is operating or
holding itself out as a public utility or
that it will make available the Services to
any other party.
(c) Landlord shall not be liable to Tenant for
any claims, damages, loss or liability due
to (i) Landlord's inability or failure to
furnish, or cause to be furnished, any of
the Services pursuant to the provisions of
Exhibit B on account of any force majeure
occurrence as described in Article 21.1,
(ii) any failure of Landlord's utility
suppliers to provide adequate and reliable
service which affects Landlord's ability to
provide, or cause to be provided, any of the
Services, or (iii) any failure, interruption
or curtailment of any of the Services due to
equipment, labor or other problems which do
not arise out of the gross negligence or
willful misconduct of Landlord, its
employees, agents or contractors. In no
event shall Landlord be liable to Tenant for
any special, incidental or consequential
damages due to any failure, interruption or
curtailment of any of the Services.
(d) In the event of any force majeure occurrence
as to any of the Services or any other
failure, interruption or curtailment
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of such Services which prevents Landlord
from having adequate capacity to supply its
own needs and those of Tenant, Landlord
shall have the right to allocate the
available quantity of any such Service on a
fair and reasonable basis according to the
respective prior usage demands of Landlord,
Tenant and other tenants of the Plant Site.
7.2 In the event that Landlord cannot lawfully provide, or cause
to be provided, any of the Services without qualifying as a
public utility or without violation of applicable utility
tariffs, then (i) Landlord shall have no further liability or
obligation to provide, or cause to be provided, any of such
Services, (ii) Landlord's failure to provide, or cause to be
provided, such Services for any of the reasons specified in
this Section shall not be deemed a partial or constructive
eviction, and (iii) Landlord and Tenant shall cooperate in
good faith in order to permit Tenant's receipt of any of such
Services directly from a third-party utility supplier;
provided, however, that all costs and expenses arising out of
such changeover shall be shared equally by Tenant and
Landlord, subject to Landlord's prior written approval of any
such proposed work. In the event that Landlord ceases to
provide, or cause to be provided, any of the Services pursuant
to the immediately preceding sentence, then the applicable
additional rent payable pursuant to Section 3.2 shall be
eliminated.
7.3 Upon written notice to Tenant, Landlord shall have no further
obligation to provide the Services and Tenant shall operate
the Facilities for the benefit of the Plant Site and any
tenants of Landlord, as may exist from time to time, subject
to their equitable contribution of any costs related to
Services furnished for their benefit. Upon assuming
responsibility for operation of the Facilities, Tenant shall
have no further payment obligations under Section 3.2 and
Tenant shall have and enjoy all protections granted to
Landlord under Sections 7.1 and 7.2 as though Tenant were
Landlord for such purposes.
7.4 Tenant shall reimburse Landlord, as they become due, for (i)
Tenant's proportionate share of ad valorem taxes and
assessments levied, assessed or imposed upon the Premises and
apportioned to the term hereof; and (ii) any taxes, excises or
other governmental impositions payable by Landlord (other than
those as measured by net income) which arise due to any
payments of rent, additional rent or other amounts made
hereunder.
7.5 Tenant's proportionate share of ad valorem taxes and
assessments applicable to the Premises which shall be payable
pursuant to Section 7.4 shall be determined based upon the
ratio which the valuation of the Premises for tax purposes
represents to the total valuation of the Plant Site for tax
purposes. Representatives of Landlord and Tenant shall meet
annually to review this matter and determine a suitable ratio.
7.6 Landlord shall pay when due all ad valorem taxes and
assessments levied, assessed or imposed upon the Premises
during the term hereof. If at any
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time Landlord defaults in the payment of any ad valorem taxes
and assessments due upon the Premises, including any taxes and
assessments due upon adjoining property comprising part of the
same tax parcel, then upon ten (10) day's prior written notice
to Landlord, Tenant shall have the right to pay the same and
deduct such payment from its monthly rent.
7.7 Tenant shall pay and discharge when due all personal property
taxes applicable to its property located upon the Premises and
all income, business, Social Security and other taxes, levies,
impositions and contributions required by any Federal, State
or local authority applicable to Tenant's business conducted
upon the Premises. Tenant shall indemnify and hold harmless
Landlord from any liability for such taxes, levies,
impositions and contributions.
7.8 If at any time during the term of this Agreement, (i) a tax,
excise or other imposition is levied, assessed or imposed upon
or measured by the rent, additional rent or other charges
payable by Tenant hereunder, other than a tax, excise or
imposition as measured by net income, or (ii) a capital levy
or other imposition is made based on the value of the Premises
or Tenant's property within the Premises, or (iii) some other
form of assessment based in whole or in part on some other
valuation of the property then comprising the Premises is
imposed, then, and in any such event, Tenant shall reimburse
Landlord for any such tax, excise, levy or imposition paid by
it.
7.9 All payments required to be made by Tenant to Landlord under
this Section 7 shall be payable as additional rent within ten
(10) days after written demand therefor and shall be payable
even though the term hereof (including and extensions) has
expired, provided that they are applicable to any tax period
falling within said term (including any extensions).
ARTICLE 8 - TERMINATION OF LEASE
8.1 At the expiration or earlier termination of the term, Tenant
shall promptly vacate and yield up the Premises, broom clean
and in the same condition or order and repair in which they
are required to be kept throughout the term hereof, reasonable
wear and tear excepted.
8.2 Upon the termination of this Agreement, Tenant shall have the
right to remove all of Tenant's property which has been
affixed, attached or otherwise made part of the Premises or
any fixtures or equipment belonging to Tenant which it is
permitted to remove pursuant to Section 6.2; provided,
however, that in performing such work Tenant shall not impair
the structural integrity or the utility systems of the
buildings comprising the Plant Site and that in each instance
Tenant repairs any damages to the Premises due to the
installation or removal of such property. Any fixtures,
equipment or other property of Tenant remaining upon the
Premises at the expiration or termination of this Agreement
shall be deemed abandoned and may be removed or otherwise
disposed of by Landlord without any notice of liability or
obligation to Tenant, but
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Tenant shall remain liable to reimburse Landlord for the cost
of performing any such work.
8.3 Anything to the contrary contained herein notwithstanding,
upon the expiration or other termination of this Agreement,
Tenant shall remain liable at its sole expense: (i) to make
any repairs to the Premises as required in Article 8, (ii) to
remove and dispose of properly any garbage, waste or other
debris, (iii) to remove and dispose of any other property
abandoned upon the Premises, and (iv) to eliminate any
nuisances or hazardous conditions. In the event the Tenant
does not promptly perform any such work as requested by
Landlord, Tenant shall be liable to reimburse Landlord the
cost of so doing.
ARTICLE 9 - SIGNS AND PROPERTY LOSS
9.1 Tenant may, subject to the prior written consent of the
Landlord, which consent shall not be unreasonable withheld or
delayed, cause the installation, at Tenant's cost and expense,
of such signs as it may require to identify Tenant's occupancy
of the Premises. Tenant shall be responsible to repair any
damage to the Premises caused by such installation, and Tenant
shall remove such signs at the expiration or other termination
of the term hereof and repair any damage caused by such
removal. Tenant shall fully comply with all requirements of
law pertaining to installation and use of such signs. Tenant
may, in compliance with law, install directional signs in the
parking areas, or at or near the street, directing traffic
from the street to the parking or loading areas of the
Premises.
9.2 Tenant shall be solely liable for the security of any of its
property located upon the Premises. In no event shall Landlord
be liable for any loss, theft, or destruction of any property
located upon the Premises of any bodily injury, death,
sickness or disease of any employees, agents, contractors or
invitees of Tenant from any cause whatsoever, including
without limitation, the leakage or escape of any steam,
electricity, gas, water, sewage, compressed air or other
utility service, the existence of any ice or show upon any
sidewalks, driveways or parking areas adjoining the Premises,
the state of repair of the Plant Site or the Premises or any
latent defect therein; and Tenant shall indemnify and hold
harmless Landlord from all claims, damages, losses and
liability on account of such matters.
ARTICLE 10 - INSPECTION BY LANDLORD
10.1 No more than once per year during normal business hours and at
any time in the event of emergency, Tenant shall upon
reasonable notice permit Landlord and the agents and
contractors of Landlord to enter the Premises for the purpose
(i) inspecting the same, (ii) during the final year of the
term showing the Premises to any prospective tenants or
purchasers, or (iii) performing any work as provided under
Article 10.2.
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10.2 Landlord reserves the right at any time to enter upon the
Premises and to make any necessary repairs thereto, including
without limitation any repairs to steam or utility lines, to
maintain a fire watch for insurance purposes or to take any
other actions as may be necessary or appropriate to eliminate
any nuisances or any dangerous, harmful or unhealthful
condition existing thereon. The reservation of such rights
shall not be deemed to be an acknowledgement of or imply any
duty or obligation on the part of Landlord to perform any such
actions, except where the obligation to do so is otherwise
specifically set forth herein. Tenant shall be solely liable
for the condition and upkeep of the Premises.
ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGES BY TENANT
11.1 Landlord hereby consents that the Tenant may sublet the
Premises or any portion thereof, or license or enter into
concession agreements covering departments therein and may
assign this Lease in writing, provided that:
(a) No such assignment nor the acceptance of rent by
the Landlord from such assignee shall relieve,
release or in any manner affect the liability of the
Tenant;
(b) Any such assignee shall, in writing, assume and
agree to keep, observe and perform all of the
agreements, conditions, covenants and terms of this
Lease on the part of the Tenant to be kept, observed
and performed and shall be, and become jointly and
severally liable with the Tenant for the
non-performance thereof accruing from said date;
(c) No further or additional assignment of the Lease
shall be made except upon compliance with and subject
to the provisions of this Article; and
(d) Any subletting shall be subject to all the terms,
conditions and covenants of this Lease.
11.2 Tenant shall have the right to mortgage Tenant's interest in
this Lease, or to assign, pledge or hypothecate the same as
security for any leasehold mortgage. No leasehold mortgage
shall be binding upon Landlord in the enforcement of its
rights and remedies herein and by law provided, unless and
until an executed counterpart thereof, together with the
address of the leasehold mortgagee thereunder, shall have been
delivered to Landlord.
11.3 Whenever any leasehold mortgage shall be in effect, the
following provisions shall apply:
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(a) When giving notice to Tenant with respect to any
default under the provisions of this Lease, Landlord
will also serve a copy of such notice upon the
leasehold mortgagee and no such notice to Tenant
shall be effective unless a copy of such notice is so
served upon the leasehold mortgagee; a copy of such
notice shall be deemed served upon the leasehold
mortgagee if sent by Landlord, by registered or
certified mail, to the address of the leasehold
mortgagee as shown on the executed counterpart of the
leasehold mortgage delivered to Landlord pursuant to
Section 11.2;
(b) The leasehold mortgagee will have the same period
after the serving of any notice as aforesaid upon it
for curing a default in the payment of fixed rent or
additional rent or causing the same to be cured as is
given Tenant after notice to Tenant;
(c) In case Tenant shall default under any of the
provisions of this Lease, the leasehold mortgagee
shall have the right to cure such default whether the
same consists of the failure to pay fixed rent or
additional rent or the failure to perform any other
act which Tenant is hereby required to do or perform
and Landlord shall accept such performance on the
part of the leasehold mortgagee as though the same
had been done or performed by Tenant;
(d) In case Tenant shall default under any of the
provisions of this Lease, other than in the payment
of the fixed rent or additional rent, Landlord will
take no action to effect a termination of this Lease
without first giving notice to the leasehold
mortgagee; and
(i) The leasehold mortgagee shall have a
period of twenty (20) days within which
either to obtain possession of the Premises
or to institute foreclosure proceedings or
obtain the appointment of a receiver, or
otherwise acquire Tenant's interest under
this Lease, and an additional period of
thirty (30) days thereafter within which to
cure such default (except that in the case
of a default which cannot be cured with due
diligence within such period of thirty (30)
days whether due to unavoidable delays or
otherwise, such period shall be extended for
such time as may be necessary to cure the
default except as prevented by unavoidable
delays); or
(ii) In case of a default which is not
susceptible of being cured by the leasehold
mortgagee as provided in subdivision (i)
above, the Landlord will further extend the
periods referred to in such subdivision (i)
to permit the leasehold mortgagee to
complete diligent foreclosure
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proceedings and thereafter to cure
diligently such default provided, however,
that the leasehold mortgagee shall not be
required to continue such possession or
continue such foreclosure proceedings or
receivership if the default shall be cured;
and provided further that during any such
time there shall be no default in the
payment of the fixed rent or additional
rent;
(e) Any leasehold mortgagee may become the legal
owner and holder of this Lease by foreclosure of its
leasehold mortgage or as a result of the assignment
of this Lease in lieu of foreclosure, and in such
event, the leasehold mortgagee shall assume due
performance of the obligations on Tenant's part to be
performed under this Lease;
(f) If, by reason of any default by Tenant, this
Lease shall be terminated by Landlord prior to the
expiration of the term of this Lease, Landlord will
enter into a new lease of the Premises with the
leasehold mortgagee for the remainder of the term
commencing as of the effective date of such
termination, at the fixed rent and additional rent
and upon the covenants, agreements, terms,
provisions, conditions and limitations herein
contained, provided that:
(i) Such leasehold mortgagee makes written
request upon Landlord for such new lease
within thirty (30) days from the date of
such termination; and
(ii) At the time of the execution and
delivery of such new lease such leasehold
mortgagee shall have paid to Landlord any
and all fixed rent and additional rent which
would at the time of the execution and
delivery thereof be due under this Lease for
such termination and pays any and all
expenses, including reasonable counsel fees,
court costs and disbursements incurred in
connection with any such default and
termination as well as in connection with
the execution and delivery of such new
lease, less the net income collected by
Landlord subsequent to the date of
termination of this Lease and prior to the
execution and delivery of the new lease (any
excess of such net income over the aforesaid
sums and expenses to be applied in the
payment of the fixed rent thereafter
becoming due under such lease); and
(iii) Such new lease to the leasehold
mortgagee shall require that all defaults
existing under this lease, other than
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in the payment of fixed rent and additional
rent, be cured with due diligence.
11.4 Landlord agrees to execute such further modifications or
amendments of this Lease (except with respect to the
provisions for payment of fixed rent and additional rent and
the term hereunder) as such leasehold mortgagee may reasonably
require, so long as such modifications or amendments shall not
decrease Tenant's obligations hereunder or increase Landlord's
obligations hereunder, and provided that such modifications or
amendments shall be approved by the holder of the
Institutional First Mortgage.
11.5 The Tenant shall always, and notwithstanding any such
assignment, mortgage or subletting or subleasing and/or
granting concession, and notwithstanding the acceptance of
rent by the Landlord from any such assignee, mortgagee or
subtenant, remain liable for the payment of rent hereunder and
for the performance of the agreements, conditions, covenants
and terms herein contained, on the part of the Tenant herein
to be kept, observed or performed.
ARTICLE 12 - INDEMNIFICATION AND INSURANCE
12.1 Tenant hereby releases and shall indemnify and hold harmless
Landlord from all claims, damages, loss and liability,
including reasonable attorneys' fees, on account of any bodily
injury, sickness, disease, death, property damage,
contamination, pollution or environmental damage or condition
arising out of possession, operation or use of the Premises,
the adjoining streets, alleys, parking areas, passageways and
loading docks by Tenant, its employees agents, contractors,
customers or invitees, except where caused by the willful act
or gross negligence of Landlord its employees, agents,
contractors or invitees or other tenants.
12.2 It is understood that Tenant shall be responsible for
obtaining or maintaining insurance coverage for any of
Tenant's personal property or fixtures maintained upon the
Premises. Tenant shall release and indemnify and hold harmless
Landlord from any claims, damages, loss or liability arising
as a result of damage or destruction to such property or
fixtures in the event of a fire or other occurrence or any
other condition now existing or hereafter arising upon the
Premises. Tenant shall obtain from its insurance carriers a
waiver of the right of subrogation against Landlord for any
loss or damage by fire or any other cause within the scope of
said fire and extended coverage insurance policies.
12.3 At its sole cost and expense, Tenant shall maintain and keep
in effect throughout the term of this Agreement, insurance
against claims for bodily injury (including sickness, disease,
and death) and property damage occurring upon, in or about the
Premises and the adjoining streets, alleys, parking areas and
passageways, under policies of general liability insurance,
including broad form contractual liability and automobile
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insurance, with limits of not less than one million dollars
($1,000,000) per occurrence for one (1) person, five million
dollars ($5,000,000) per occurrence for two (2) or more
persons, and one million ($1,000,000) for property damage. The
aforesaid minimum insurance limits shall in no way limit or
diminish Tenant's liability to Landlord pursuant to Section
12.1
12.4 At its sole cost and expense, Tenant shall maintain and keep
in effect during the term hereof worker's compensation and
employer's liability insurance in the minimum amounts as
required by law.
12.5 Upon the execution hereof, Tenant shall furnish to Landlord
certificates of insurance as evidence of the insurance
coverage required under Sections 12.2, 12.3, and 12.4, and
each such policy of insurance shall name Landlord as an
additional insured and provide that it shall not be amended,
modified or cancelled, except upon thirty (30) days' prior
written notice to Landlord.
12.6 In no event shall Landlord be liable to Tenant for any
special, indirect, incidental or consequential damages on
account of any default by Landlord under this Agreement or any
claims, damages or losses of Tenant arising out of its
possession, occupation or use of the Premises.
12.7 With respect to any fire and extended coverage insurance
policy carried by Landlord upon the Plant Site, Landlord
shall, to the extent available, obtain a waiver of subrogation
by its insurer against Tenant, except to the extent of any
deductible amount under such coverage.
ARTICLE 13 - DEFAULT
13.1 Each of the following shall be deemed a default by Tenant and
a breach of this agreement:
(a) filing of a petition for adjudication as a bankrupt,
or for reorganization, or for an arrangement under
any Federal or State statute;
(b) dissolution or liquidation of Tenant, without the
transfer to and assumption by a financially
responsible third-party of this Agreement;
(c) appointment of a permanent or temporary receiver or a
permanent or temporary trustee of all or
substantially all the property of Tenant;
(d) taking possession of the property of Tenant by a
governmental officer or agency pursuant to statutory
authority for dissolution, rehabilitation,
reorganization or liquidation; and
(e) making by Tenant of an assignment for the benefit of
creditors.
If any event mentioned in this subdivisions (a-e) shall occur,
Landlord may thereupon or at any time thereafter elect to
cancel this Agreement upon ten (10) days' prior written notice
to Tenant and this Agreement
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shall terminate on the day in such notice specified with the
same force and effect as if that date were the date herein
fixed for the expiration of the terms of this Agreement.
(f) Default in the payment of the rent or additional rent
herein reserved or any party thereof for a period of
fifteen (15) days after receipt of written notice
concerning such default.
(g) Default in the performance of any other covenant or
condition of this Agreement on the part of Tenant to
be performed for a period of thirty (30) days after
written notice from Landlord specifying the nature of
such default. For purposes of this subdivision, no
default on the part of Tenant in performance of work
required to be performed on acts to be done shall be
deemed to exist if after receipt of the aforesaid
notice Tenant diligently takes action to rectify the
same and prosecutes such action to completion with
reasonable diligence, subject, however, to
unavoidable delays.
13.3 In case of any such default under Article 13.1(f) or (g) and
at any time thereafter following the expiration of the
respective grace periods above-mentioned, Landlord may serve a
notice upon the Tenant electing to terminate this Agreement
upon a specified date not less than ten (10) days after the
date of serving such notice and this Agreement shall expire on
the date so specified as if that date had been originally
fixed as the expiration date of the term herein granted and
all rent and additional rent applicable to the balance of the
term hereof or any then existing extension term shall
thereupon become due and payable. However, a default under
Section 13.1(f) or (g) shall be deemed waived if such default
is cured before the date specified for termination in the
notice of termination served on Tenant pursuant to this
Section.
13.4 In the event this Agreement shall be terminated pursuant to
this Article or by summary proceedings or otherwise, Landlord
shall mitigate its damages and Landlord may, in its own name
and in its own behalf, relet the whole or any portion of the
Premises, for any period equal to or greater of less than the
remainder of the then current term for any sum which it may
deem reasonable, to any Tenant which it may suitable and
satisfactory, and for any use and purpose which it may deem
appropriate, and in connection with any such lease Landlord
may make such changes in the character of the improvements on
the Premises as Landlord may determine to be appropriate or
helpful in effecting such lease. However, in no event shall
Landlord be under any obligation to pay or credit Tenant with
any surplus of any sums received by Landlord on a reletting of
the Premises in excess of the rent reserved in this Agreement.
13.5 All remedies specified in this Section shall be non-exclusive
and Landlord's reliance upon such remedies shall not preclude
it from availing itself of any other rights or remedies which
it may have at law or in equity.
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ARTICLE 14 - FIRE AND CASUALTY
14.1 In the event of any damage to or destruction of the Premises
by fire or other occurrence so that twenty percent (20%) or
more of the building floor area comprising the Plant or the
Premises becomes untenable or unfit for occupancy, then within
thirty (30) days after the date of such occurrence, either
Landlord or Tenant shall have the right to elect by written
notice to the other to cancel this Agreement as of the date of
such damage or destruction, in which event the rent and
additional rent shall be apportioned to such date. If neither
party duly elects to cancel this Agreement pursuant to the
immediately preceding sentence, then Landlord shall repair and
restore the Premises to substantially their same condition
prior to such occurrence using reasonable speed and dispatch
and the rent and additional rent shall be equitably abated as
set forth in the following Section from the date of such
occurrence until the date when repairs are completed.
14.2 In the event of any fire or other occurrence which damages or
destroys less than twenty (20%) of the building floor area
comprising the Premises, Landlord shall repair and restore the
Premises with reasonable speed and dispatch, and the rent and
additional rent shall be equitably abated in the same
proportion that the area of the Premises which shall be
untenable of unfit for occupancy by Tenant in the conduct of
its business represents to the total area of the Premises,
from the date of such destruction until the completion of such
repairs.
14.3 In the event that a fire or other occurrence as provided in
Section 14.2 happens during the final 180 days of the term
hereof, or any extension periods, Landlord shall not be
obligated to repair and restore the Premises, and this
Agreement shall remain in full force and effect, subject to an
equitable abatement of rent, fees and additional rent, until
the expiration of the term hereof.
14.4 In no event shall Landlord have any liability or obligation to
Tenant with respect to the repair or restoration of any
property of Tenant located upon the Premises due to any fire
or other occurrence. In the event this Agreement is cancelled
pursuant to Section 14.1, then Tenant shall remain obligated
promptly to remove or eliminate any nuisance or dangerous,
harmful or unhealthful condition then existing on or about the
Premises due to its use thereof.
ARTICLE 15 - CONDEMNATION
15.1 If due to any condemnation or taking by any public or
quasi-public authority or other party having the right of
eminent domain, (i) twenty percent (20%) or more of the
building floor area comprising the Premises is taken, or (ii)
access to the Premises is permanently denied, then and in any
of the aforesaid events' the term of this Agreement shall, at
the option of Tenant, cease and become null and void from the
date when the party
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exercising the power of eminent domain actually takes or
interfered with the use of the Premises or denies access
thereto. Rent and additional rent shall be apportioned to the
time of surrender of the Premises.
15.2 Tenant shall have a separate and independent claim for the
following:
(i) For the taking of or damage to its and its
subtenants', licensees' and fixtures, furniture and
furnishings, partitions, operating equipment,
inventory and personal property, whether or not the
same are permanently attached to the realty and
whether or not they can be easily removed without
substantial injury to the freehold, and for the value
of this Lease;
(ii) Any claim now or hereafter permitted by law for
costs of removal from the condemned premises or
relocation;
(iii) Any claim now or hereafter permitted by law for
loss or interruption of Tenant's business;
(iv) Any claim for a temporary taking of all or any
part of the Premises.
15.3 In the event of any partial taking which does not cause a
termination of this Agreement pursuant to Section 15.1, then
the rent and additional rent shall abate in an amount mutually
acceptable to Landlord and Tenant based on the effect the
taking shall have on Tenant's operation and the relationship
that the area of the Premises taken bears to the area of the
Premises prior to such condemnation.
15.4 After any condemnation or other taking as specified in Section
15.1 and 15.2, Landlord shall, at its sole cost and expense,
to the extent permitted by applicable law and as the same may
be practicable on the Plant Site, promptly make such repairs
and alterations in order to restore the remainder of the
Premises to their same condition existing prior to the
condemnation or taking.
ARTICLE 16 - RELATIONSHIP OF PARTIES
16.1 The execution of this Agreement shall not be deemed to create
a partnership, agency or other business relationship between
Landlord and Tenant, other than the tenancy created hereunder,
and Tenant shall be solely and exclusively liable for all
claims, damages, losses, liabilities and obligations arising
out of the conduct of its business upon the Premises,
including the payment of all taxes with respect thereto.
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ARTICLE 17 - NOTICES
17.1 Any notices or communications required or permitted hereunder
shall be deemed sufficiently given if sent by commercial
courier service or United States Postal Service, certified
mail, postage prepaid, return receipt requested, to the
respective parties at the following addresses:
if to Landlord:
UCAR Carbon Company
3102 West End Avenue
Suite 1100
Nashville, Tennessee 37203
Attention: General Counsel
if to Tenant:
UCAR Graph-Tech
11709 Madison Avenue
Lakewood, Ohio 44109
Attention: President
Either party may change the persons or addressed to which
notice or other communications are to be sent to it by giving
written notice of any such changes in the manner provided
herein for giving notice. Notices shall be deemed given on the
date of delivery or the date of refusal to accept delivery by
the addressee (either as confirmed by the United States Postal
Service or commercial courier service, as the case may be).
ARTICLE 18 - COVENANT AGAINST LIENS; SUBORDINATION
18.1 Tenant shall not encumber, or suffer or permit to be
encumbered, the Premises or the fee thereof by any lien,
charge or encumbrance, and Tenant shall have the authority to
mortgage or hypothecate this Agreement in any way whatsoever.
The violation of this Article shall be considered a breach of
this Agreement. Within thirty (30) days after notice thereof,
Tenant shall satisfy or otherwise cause to be removed of
record any mechanic's, materialmen's or other lien or
encumbrance filed against the Premises arising out of its
occupancy and use of the Premises.
ARTICLE 19 - CONDITION OF PREMISES
19.1 Tenant has inspected the Premises and accepts the same "as
is", without any reliance whatsoever upon any representation,
warranty or guarantee, either express or implied, by Landlord,
its employees or agents as to the condition of state of repair
of the Premises.
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19.2 LANDLORD MAKES NO REPRESENTATIONS, WARRANTIES OR GUARANTEES,
EITHER EXPRESS OR IMPLIED, AS TO THE PREMISES OR ANY FIXTURES
COMPRISING ANY PART THEREOF. NO WARRANTY OR GUARANTEE SHALL BE
IMPLIED OR OTHERWISE CREATED UNDER THE UNIFORM COMMERCIAL CODE
(OTHER THAN THE WARRANTY OF TITLE AS PROVIDED UNDER THE
UNIFORM COMMERCIAL CODE) OR OTHERWISE AS TO ANY SUCH PROPERTY
OR FIXTURES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE.
ARTICLE 20 - SUBORDINATION AND ESTOPPEL
20.1 At the option of Landlord, this Lease shall be subordinate at
all times to the lien of any institutional first mortgage
(meaning a first mortgage or a deed of trust held by a bank,
savings and loan association, insurance company or pension
fund) as security for any note, debenture, bond or otherwise
in any amount which may hereafter be placed on the Premises or
the Plant Site (hereinafter the "Institutional First
Mortgage") and to all renewals, modifications, replacements,
consolidations and extensions thereof, provided and upon the
condition that the holder of the Institutional First Mortgage
(the holder of the Institutional First Mortgage is herein
sometimes called the "Institutional First Mortgagee") shall
agree that:
(i) As long as no default exists beyond applicable
notice and cure periods, nor any event has occurred
which has continued to exist for such period of time
after notice, if any, required by this Lease, which
entitles Landlord to terminate this Lease or which
cause, without any action of Landlord, the
termination of this Lease, or which entitled Landlord
to dispossess Tenant then:
(a) The right of possession of Tenant to the
Premises, and Tenant's rights arising out of
this Lease, including, but not limited to,
the renewal options, privileges, rights,
remedies and causes of actions hereunder,
shall not be affected or disturbed by either
the holder of such mortgage in the exercise
of any of such holder's rights under its
mortgage, or the notes, debentures, bonds or
debt secured thereby, or otherwise by law
provided, or by any purchaser of the
Premises or by any person acquiring title
thereof, as referred to in subsection (c) of
this Section.
(b) In the event that the holder of the
Institutional First Mortgage comes into
possession of, or ownership of the title to
the Premises by foreclosure of its mortgage,
or by
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proceedings on the said notes, debentures,
bonds or debt or otherwise, this Lease shall
not be terminated or affected by said
foreclosure or any of said proceedings; and
this Lease shall continue in full force and
effect as a direct lease between Tenant and
such mortgagee upon all the terms,
covenants, conditions and agreements set
forth in this Lease;
(c) In the event that the Premises are sold
or otherwise disposed of pursuant to any
right or any power contained in the
Institutional First Mortgage or bond or
other instrument in connection with such
mortgage or bond as a result of proceedings
thereon, or as otherwise authorized by law,
this Lease shall not be terminated or
affected thereby, and the purchaser of the
Premises or any person acquiring title
thereto through or by virtue of said sale or
other disposition shall take subject to this
Lease and any prior and future rights of
Tenant herein; and this Lease shall continue
in full force and effect as a direct lease
between Tenant and any party acquiring title
to the Premises, as aforesaid, upon all the
terms, covenants, conditions and agreements
set forth in this Lease.
(ii) If any building upon the Premises is damaged or
destroyed by fire or other casualty, or if any
portion of the Premises shall be taken by eminent
domain, the insurance proceeds and/or such
condemnation awards will be applied in accordance
with the provisions of this Lease.
20.2 In the event that this Lease shall subsequently become
subordinate to an Institutional First Mortgage, Landlord shall
immediately provide Tenant with a Recognition and
Non-Disturbance Agreement satisfactory to Tenant from such
Mortgagee. If Landlord fails to timely provide such
agreement(s) in accordance with this paragraph, then Tenant
may terminate this Lease at any time thereafter.
After such time as Landlord furnishes Tenant with the above
referenced Recognition and Non-Disturbance Agreement, Tenant
shall, without charge, within twenty (20) days after request
by Landlord, but not more than twice in any one calendar year,
certify by written instrument, duly executed and delivered to
Landlord, or any other person, firm or corporation specified
by Landlord:
(a) That this Lease is unmodified, and in full force
and effect, if such be the case, or if there have
been any modifications, that the
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same are in full force and effect, if such be the
case, as modified and stating the modifications and
the dates thereof; and
(b) Whether or not to the best knowledge of Tenant
there are then existing any set-offs or defenses
against the enforcement of any of the agreements,
terms, covenants or conditions of this Lease and any
modifications of this Lease upon the part of Tenant
to be performed or complied with, and if so,
specifying the same.
20.3 Tenant shall, in the event of the sale or assignment of
Landlord's interest in the Premises or in the event of any
proceedings brought for the foreclosure of or in the event of
exercise of the power of sale under any mortgage made by
Landlord covering the Premises, upon written notice, to the
purchaser and recognize such purchaser as Landlord under this
Lease, provided, however, that such purchaser or other
successor in interest to the Landlord recognize Tenant and
assume Landlord's obligations hereunder, including without
limitation obligations for prior and future defaults or
offsets provided for herein. Any such purchaser or successor
shall also furnish proper legal evidence of its rights to the
Premises and this Lease, and shall furnish its address for
notices. Tenant shall not be obligated to change the place it
sends rents and other charges hereunder until Tenant receives
all such documentation and information provided for in this
paragraph.
20.4 Landlord shall, within ten (10) days after requested to do so
by the Tenant herein, deliver an estoppel certificate,
certified by written instrument duly executed and acknowledged
containing information regarding this Lease substantially as
set forth in Section 20.2. Such certificate shall run in favor
of any prospective mortgage holder of Tenant's interests
herein or any prospective assignee or subtenant of Tenant.
20.5 Upon the request of a prospective Institutional First
Mortgagee, Tenant agrees to give due consideration to any
reasonable modifications or amendments of this Lease (except
with respect to the provisions for payment of fixed rent and
additional rent and the term hereunder) as such Institutional
First Mortgagee may reasonably request so long as such
modifications or amendments shall not increase Tenant's
obligations, decrease Tenant's rights or decrease Landlord's
obligations hereunder. Unless acceptable to Tenant, Tenant
shall have no obligation to accede to such requests.
ARTICLE 21 - FORCE MAJEURE
21.1 Except for the obligations of Tenant to pay rent, additional
rent and other charges as in this Agreement provided, the
period of time during which Landlord or Tenant is prevented
from performing any act required to be
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performed under this Agreement by reason of fire, flood,
hurricanes, strikes, lock-outs or other industrial
disturbances, explosions, civil commotion, acts of God of the
public enemy, governmental prohibitions or preemptions,
embargoes, inability to obtain material or labor the act of
default of the other party, or other events beyond the
reasonable control of Landlord or Tenant, as the case may be,
and which event makes performance hereunder commercially
impracticable, shall be added to the time for performance of
such act.
ARTICLE 22 - QUIET ENJOYMENT
22.1 If and so long as Tenant shall pay the rent and additional
rent reserved hereunder and shall perform and observe all the
terms, covenants and conditions on the part of Tenant to be
performed and observed, Landlord covenants that Tenant shall
lawfully and quietly, hold occupy and enjoy the Premises,
subject, however, to the provisions of this Agreement.
ARTICLE 23 - WAIVER
23.1 No consent or waiver, express or implied, by a party to or of
any breach or default in the performance by the other party of
it's obligations hereunder shall be deemed or construed to be
a consent or waiver of any other breach or default in the
performance by the other party or its obligations. Failure on
the part of the non-breaching party to complain of any act or
failure to act of the breaching party or to declare the
breaching party in default, irrespective of how long such act
or failure continues, shall not constitute a waiver by the
non-breaching party of its rights hereunder.
ARTICLE 24 - MEMORANDUM OF LEASE
24.1 This Agreement shall not be recorded. At the request of either
party, the parties shall execute and acknowledge a memorandum
of lease suitable for recording purposes.
ARTICLE 25 - BROKERAGE FEES
25.1 Landlord and Tenant acknowledge that no real estate broker or
agent or other party is entitled to any brokerage fee,
commission or other compensation on account of this Agreement
or any transaction contemplated hereunder. Tenant shall
indemnify and hold harmless Landlord from all claims, damages,
loss or liability of Landlord for any brokerage fee,
commission or other compensation owing to any party claiming
to represent Tenant. Landlord shall indemnify and hold
harmless Tenant from all claims, damages, loss or liability of
Tenant for any brokerage fee, commission or other compensation
owing to any party claiming to represent Landlord.
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ARTICLE 26 - GOVERNING LAW
26.1 The validity, interpretation and performance of this Agreement
shall be governed according to the laws of the State of Ohio
applicable to agreement made and to be performed entirely in
that state.
ARTICLE 27 - HOLDOVER
27.1 If Lessee continues to occupy the Premises after the
termination of this Agreement, such holding over shall not be
deemed to extend or renew the term hereof, but the tenancy
thereafter shall continue as a tenancy from month-to-month
upon the same terms and conditions as provided herein, except
that Landlord may terminate such tenancy upon ten (10) days'
written notice to Tenant.
ARTICLE 28 - SUCCESSOR LANDLORD
28.1 In the event that Landlord's interest in this Lease shall pass
to or devolve upon another, or in the event that the rent
accrued or to accrue hereunder shall be assigned, or in the
event that one other than Landlord shall become entitled to
collect the rent accrued or to accrue hereunder, then and in
any such event, notice of the fact shall be given to Tenant by
Landlord in writing, duly executed and acknowledged by
Landlord and, until such notice and proof shall be given to
Tenant, Tenant may continue to pay the rent accrued or to
accrue hereunder to the one to whom, and in the manner in
which, the last preceding installment of rent hereunder was
paid and each such installment shall, to the extent thereof,
fully exonerate and discharge Tenant. In the event that Tenant
shall pay rent or other charges hereunder to any person other
than Landlord in accord with any notice purporting to be
executed by or on behalf of Landlord, or by or on behalf of
the person who, under the terms of this Lease, shall give the
notice, and, which is believed in good faith by Tenant to be
genuine, such payment shall constitute payment and discharge
of the obligation of Tenant thus paid. In the event that
Tenant shall be advised of any dispute as to the person to
whom the rent under this Lease shall be payable, or shall
receive notice of any claim to the payment of rent or other
charges hereunder due or to accrue hereunder from a person
other than Landlord, Tenant shall promptly advise Landlord in
writing of the existence and nature of such claim and, unless
Landlord shall, within twenty (20) days of such advice by
Tenant, either advise the Tenant to pay the rent in accord
with such claim, or shall supply Tenant with a duly executed
release of such claim by the claimant or a direction from such
claimant to pay the rent to Landlord, Tenant shall be entitled
to pay any installment of rent or other charges hereunder so
claimed then due or thereafter to accrue
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under this Lease, into a bank or trust company in the County
in which the Premises are located for deposit to the account
of Landlord and such claimant, and the making of such payment
to such bank or trust company, shall discharge Tenant of any
further obligation for the payment of the rent or other
charges hereunder so paid. Tenant shall be under no obligation
to recognize any agent for the collection of rent accrued or
to accrue hereunder or otherwise authorized to act with
respect to the Premises until written notice of the
appointment and the extent of the authority of such agent
shall be explicitly given by the one appointing such agent.
ARTICLE 29 - ENTIRE AGREEMENT
29.1 This Agreement contains all the promises, agreements,
conditions and understanding between Landlord and Tenant with
respect to the leasing of the Premises, and there are no
promises, agreements, conditions or understandings, either
written or oral, between them other than as set forth herein.
No amendment, modification or addition to this Agreement shall
be effective unless it is contained in a written agreement
executed by authorized representatives of both parties.
29.2 The covenants, conditions and agreements contained in this
Agreement shall being and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
ARTICLE 30 - OPTION FOR ADDITIONAL SPACE
30.1 Should the remainder of the Plant Site not included within the
Premises composed of approximately 204,000 feet ever be
vacated by its current tenant (Advanced Ceramics Corporation)
or any future tenant, Tenant shall have the first right and
option to lease that additional space on similar terms and
conditions as may be in effect under this Lease during that
then current term. Rent shall be determined based on a
breakdown of the tenant's then current rent divided by 207,000
square feet to arrive at a per square foot rental rate. Tenant
may then rent such additional space within the Plant Site at
that rate and this Lease shall be amended to include that
additional space. For example, should the current tenant
vacate the property on the fifth (5th) year of Tenant's first
term, the rent for the additional space should be calculated
as follows:
(a) $213,210.00/207,000 sq. feet = $1.03 per
square foot.
That rental rate shall be in effect until the termination of
Tenant's first term or in five (5) years as provided in this
example.
(b) Should Tenant elect not to immediately lease
the additional space within the Plant Site,
Tenant shall retain a right of
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first refusal against any other Tenant
Landlord may desire. Landlord shall notify
the tenant within ten (10) days of receiving
an offer for lease of the space. Tenant then
may either exercise its right to lease all
or any part of the Plant Site or inform the
Landlord that it waives its right of first
refusal, solely as to the space to be rented
to the prospective tenant.
ARTICLE 31 - RIGHT OF FIRST REFUSAL ON SALE OF THE PROPERTY
31.1 Without affecting or limiting any of the rights, privileges,
options or estates granted to Tenant under this Lease, it is
agreed that if the Landlord at any time during the term of
this Lease receives one or more bona fide offers from third
parties to purchase the Premises and/or all or any part of the
Plant Site and if any such offer is acceptable to Landlord,
then Landlord agrees to notify Tenant in writing, giving the
name and address of the offeror, and the price, terms and
conditions of such offer, and Tenant shall have thirty (30)
days from and after the receipt of such notice from Landlord
in which to elect to purchase the same property for the
consideration contained in the bona fide offer. If Tenant does
not elect to purchase said property and Landlord thereafter
sells the property, the purchaser shall take the property,
subject to and burdened with all the terms, provisions and
conditions of this Lease, including this Article and the
rights of Tenant under this Lease as against the new owner
shall not be lessened or diminished by reason of the change of
ownership. Tenant's failure at any time to exercise its option
under this Article shall not affect this Lease or the
continuance of Tenant's rights and options under this Article
or any other Article.
31.2 In the event Tenant elects to purchase the same property as
provided in this Lease, then Landlord shall, within thirty
(30) days after receipt of such notice of election by Tenant,
deliver to Tenant a title insurance policy in the amount of
the consideration set forth in such offer, issued by a
responsible title guarantee company, showing a good and
marketable title in Landlord. If Landlord fails or refuses to
furnish the title policy, then Tenant may, at its election,
procure the same at Landlord's expense, and in the amount of
the purchase price, and deduct the cost thereof from the cash
consideration to be paid for the property. Tenant shall have
thirty (30) days after receipt of the title policy in which to
examine the title and notify the Landlord whether or not the
title is acceptable to Tenant. If Tenant is willing to accept
Landlord's title and consummate the purchase, then Landlord
shall, within ten (10) days after written notice thereof from
Tenant, convey the premises to Tenant by general warranty
deed, free and clear of all liens and encumbrances except
highway easements, private road easements and restrictions of
record which were of record as of the
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date of Tenant's acceptance of the premises hereunder or
incorporated in an amendment to this Lease, if any, and
deliver such deed to Tenant upon tender of the consideration.
31.3 Notwithstanding any other provisions of this Lease, the
provisions of this Article will not apply to any sale of the
Premises or any property of which the Premises are a part at
foreclosure, and shall not be binding upon any purchaser at
foreclosure, any mortgagee in possession, or any holder of a
deed in lieu of foreclosure or the successors or assigns of
any of the foregoing, or to any sale of the Premises by
Landlord in connection with sale and leaseback financing.
31.4 If Tenant is not willing to accept Landlord's title, Tenant
shall make any objections thereto in writing to Landlord and
Landlord shall be allowed sixty (60) days to utilize its best
efforts to make such title acceptable to Tenant. If such title
is not rendered marketable within sixty (60) days from the
date of said written objections thereto, Tenant may, at its
election, take such action, including instigation of legal
process (in which the Landlord agrees to participate) to
remedy any such defect in title making such acceptable to
Tenant, and to deduct all costs thereof from the cash
consideration to be paid for the property. If the Tenant is
unable to correct such defects in title or elects not to
attempt such remedy, neither party shall be held liable for
damages to the other party and both parties shall be released
of all liabilities and obligations under this Article.
ARTICLE 32 - LANDLORD'S TITLE
32.1 Landlord warrants and represents that as of the date hereof:
(a) Landlord is the owner of a fee simple estate in
the Premises and the Plant Site and has the right and
power to enter into this Lease and to perform same
and by this instrument conveys a good leasehold
interest to Tenant in accordance with the terms,
conditions and provisions hereof.
(b) There are no liens, encumbrances, mortgages,
easements, restrictions, leases or other agreements
affecting the Premises or the Easements prior in lien
to this Lease other than (i) an Institutional First
Mortgage which complies with the provisions of
Article 20 hereof; (ii) reservations, restrictions or
agreements which do not prohibit, restrict or
otherwise affect the right of Landlord or Tenant to
make the alterations described in Article 6 hereof or
the right of Tenant to use the Premises for the
purposes set forth in Article 4 hereof. In the event
that the Tenant shall ever determine that there are
any liens or encumbrances on the Premises or the
Easements prior in lien to this Lease other than (i)
the
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Institutional First Mortgage; (ii) reservations,
restrictions or other agreements which do not
prohibit, restrict or otherwise affect the right of
Landlord or Tenant to make the alterations described
in Article 6 hereof or the right of Tenant to use the
Premises for the purposes set forth in Article 4
hereof, and if Landlord shall fail to cause such
liens or encumbrances to be removed within thirty
(30) days after notice thereof from Tenant, Tenant
may, within thirty (30) days after said thirty (30)
day period, in addition to any rights it may have at
law or equity, cancel this Lease by notice to
Landlord (or waive any such liens or encumbrances) in
which event Tenant shall thereupon be relieved of any
and all liability under this Lease.
32.2 Landlord warrants the non-existence of any zoning or other
restrictions of any nature preventing or restricting use of
the Premises for the conduct of Tenant's business or use of
common areas for parking purposes, and that should such zoning
or other restriction be in effect or adopted at any time
during the term of this Lease, preventing or restricting
Tenant from conducting Tenant's business or using the common
areas in conjunction therewith, Tenant may, at its option,
terminate this Lease and shall be released of and from all
further liability hereunder.
ARTICLE 33 - WAIVER OF LIEN
33.1 Landlord agrees, upon Tenant's request, to execute any
reasonable waiver of lien and/or waiver of ownership rights,
which may be reasonably requested by any vendor, lessor or
chattel mortgagee, in regard to any of Tenant's furniture,
fixtures, equipment or other article of personal property; and
to use its best efforts to obtain similar releases or waivers,
from any mortgagee of the Premises.
ARTICLE 34 - DEFINITION OF CERTAIN TERMS
34.1 For purposes of this Lease, unless the context requires
otherwise:
(a) "Gross Area" shall mean the floor area of an
entire building structure or structures and all
component parts thereof, measured to and from the
centerline of demising walls and the outside of
exterior walls. In computing Gross Area there shall
be no exclusion by reason of stairs, elevators,
escalators, interior partitions or other interior
construction or equipment.
(b) "Lease Year" shall mean a calendar year.
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(c) "Unavoidable Delays" shall mean delays due to
strikes, weather, lockouts, inability to obtain labor
or materials (except due to lack of cash or credit),
governmental restrictions, enemy action, civil
commotion, fire, casualty or other causes beyond the
reasonable control of Landlord or Tenant.
(d) "Term of this Lease" or "term hereof" shall mean
the original term specified in Article 2 hereof and
any extension term of this Lease, unless the context
otherwise requires.
(e) "Other charges hereunder" shall mean tax charges,
insurance charges, common area maintenance charges,
and any other charges, payments and additional rent
(except for fixed rent) due or payable by Tenant
under this Lease.
ARTICLE 35 - SATELLITE DISH LEASE
35.1 Tenant is hereby granted the right, from time to time during
the term of this Lease, to install, maintain, repair and
replace antennae and satellite dishes and other transmitters
and receivers on the roof or the exterior side or rear walls
of the building located on the Premises or in a secured
location acceptable to Tenant on the ground in close proximity
to the Premises. All such installations by Tenant shall be in
accordance with all codes and laws. Tenant shall have the
right to remove any of such equipment on or before the
expiration of the lease term.
ARTICLE 36 - FASB 13
36.1 Landlord shall supply to Tenant within thirty (30) days after
full execution of this Lease and within 30 days after the
commencement of each extension term hereof exercised by Tenant
(and at other reasonable times at Tenant's request)
information in writing required by Tenant to comply with its
obligations as set forth in Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No.
13 (accounting principles for leases, to determine if Lease is
a capital lease or an operating lease) or any similar
requirements in lieu thereof imposed by generally accepted
accounting principles which Tenant may deem appropriate to
follow, such information to contain (a) the date of
acquisition of the Premises by Landlord, (b) estimated useful
life of Premises at acquisition, (c) remaining useful life as
of commencement date of Lease or beginning of option, (d) the
fair market value of the land, the building, and any other
appurtenances comprising the Premises, and (e) such other
information as may be reasonably requested by Tenant.
29
<PAGE> 30
ARTICLE 37 - DISPUTES
37.1 If at any time hereafter a dispute shall arise between
Landlord and Tenant with respect to any amount of money to be
paid by either of them to the other under any of the
provisions of this Lease, the party against whom the
obligation shall be asserted shall have the right to make
payment "under protest" and if such party shall exercise such
right such payment shall not be deemed a voluntary payment but
there shall be deemed reserved to such party the right to
institute appropriate action or proceeding against the other
for recovery of the whole or such part of said sum as such
party shall claim it was not obligated to pay hereunder. If at
any time a dispute shall arise between Landlord and Tenant as
to any act to be done or work to be performed by either of
them or in or about the Premises under any of the provisions
of this Lease, the party against whom the obligation to do
such act or perform such work shall be asserted, may do such
act or perform such work and pay the cost thereof "under
protest" and if such party shall do so the performance of such
act or work and payment of such cost shall not be deemed a
voluntary performance of voluntary payment, but there shall be
deemed reserved to such party the right to institute
appropriate action or proceedings against the other for
recovery of the whole of such cost or such part thereof as
shall represent the cost of performing the act or work which
such party shall claim it was not obligated to perform
hereunder.
In no event shall Tenant be obligated to pay rent to more than one entity at any
one time.
IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
UCAR Carbon Company Inc.
By: /s/ Karen G. Narwold
Title: Vice President
UCAR Graph-Tech Inc.
By: /s/ John J. Wetula
Title: President
30
<PAGE> 31
EXHIBIT "A"
PREMISES
Premises include buildings 3, 4, 4A, 5, 5A, 6A, 6D, 25, 25A, 25B, 25C, 25D, 69,
73, 20A as seen on the attached site plan.
PLANT SITE
See attached Legal Description.
33
<PAGE> 32
EXHIBIT B
SERVICES
<TABLE>
<CAPTION>
Services Quantity Specifications Charges
-------- -------- -------------- -------
<S> <C> <C> <C>
1. Telephone/Mail Local and Unicom, Ohio actual charges
Long Distance Bell, AT & T, for any and all
Service all mailroom use related calls
Costs and Unicom actual charges
</TABLE>
34
<PAGE> 1
Exhibit 10.11
INTELLECTUAL PROPERTY TRANSFER AGREEMENT
THIS AGREEMENT, made as of the 28th day of December 1999, by and
between UCAR Carbon Technology Corporation, a Delaware corporation having
offices at 3102 West End Avenue, Nashville, Tennessee, 37203 ("Transferor"), and
UCAR Graph-Tech Inc., a Delaware corporation having offices at 11709 Madison
Avenue, Lakewood, Ohio, 44107 ("Transferee").
WHEREAS UCAR Carbon Company Inc. did enter into a Transfer Agreement
with Transferee effective January 1, 2000, (the "Transfer Agreement"); and
WHEREAS Transferor is a wholly-owned subsidiary of UCAR Carbon Company
Inc. and in furtherance of the Transfer Agreement enters into this Agreement;
NOW THEREFORE INTENDING TO BE LEGALLY BOUND, and for and in
consideration of the premises and the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.01 Assets. "Assets" shall mean, the following intellectual
property rights of Transferor including:
(i) All United States and foreign patents and patent
applications, listed in Schedule B attached hereto, which are
owned solely or jointly by Transferor and all continuations,
continuations-in-part, divisions, reissues and other patents
which may be issued by any country based in whole or in part
on the patents and/or applications listed in Schedule B (the
"Patents").
(ii) All technology contracts (including Patent
Licenses) listed in Schedule C attached hereto (the
"Technology Contracts");
(iii) All technical information, know-how and trade
secrets in any physical form including but not limited to all
notebooks, records, reports, data, documents, drawings,
specifications, manuals, memoranda, and computer
<PAGE> 2
programs developed, licensed or otherwise acquired by
Transferor and relating to the natural, acid-treated or
flexible graphite business (the "Technology").
(iv) All trademarks, trade names and service marks,
registrations and applications therefor, and trademark license
agreements listed on Schedule D attached hereto (the
"Trademarks");
(v) All copyrights, and registrations and
applications therefore, and copyright licenses related to the
natural or flexible graphite business (the "Copyrights"); and
(vi) All (1) improvements made on any invention
covered by the Patents and on the Technology, and (2) other
technological inventions and developments (whether or not
patented) made, licensed or otherwise acquired by Transferor
at any time subsequent to December 28, 1999 (the
"Improvements").
1.02 Transfer Date. "Transfer Date" shall mean December 28, 1999.
1.03 Third Party. "Third Party" shall mean any and all parties
other than Transferor or Transferee, and shall include without limitation,
all affiliated and subsidiary companies of Transferor.
ARTICLE II. TRANSFER OF ASSETS
2.01 Transfer of Assets. Effective as of the Transfer Date, Transferor
hereby conveys, transfers, assigns and delivers to Transferee, and Transferee
hereby accepts from Transferor as a contribution to Transferee's capital stock,
all of Transferor's right, title and interest in and to the Assets. Transferor
shall execute and deliver to Transferee all necessary Assignment both U.S. and
Foreign in a form sufficient to convey title to the Assets; including:
(i) Assignments of all the Patents and Patent Applications to
Transferee.
(ii) An Assignment of the Technology Contracts to Transferee.
(iii) An Assignment of the Technology to Transferee.
(iv) Assignments of all the Trademarks to Transferee.
(v) An Assignment of all the Copyrights to Transferee.
(vi) An Assignment of all the Improvements to Transferee.
2.02 Representation as to Title. Transferor hereby represents and
warrants that it has good title to the Patents and to the Technology, including
that obtained by way of
2
<PAGE> 3
assignment. Except for the warranty of title, Transferor makes no other
representation and grants no other warranty with respect to the Patents or the
Technology and none is to be implied at law or equity of any country or other
jurisdiction.
2.03 Capitalization. Transferor holds One Hundred (100) shares of
Transferee's voting common stock, $1.00 par value (the "Stock") which shares are
fully paid and non-assessable and which constitute all the issued and
outstanding shares of Transferee capital stock. Transferor's transfer of the
Assets shall be an additional contribution to capital.
2.04 Transfer Deliveries. On the Transfer Date or as Transferee shall
require, Transferor and Transferee shall deliver or cause to be delivered to one
another:
(a) The executed and acknowledged Assignments with respect to the
Patents and Patent Applications identified on Schedule B.
(b) One (1) executed and acknowledged Assignment and Assumption of
Technology Contracts.
(c) One (1) executed and acknowledged Assignment with respect to
the Technology owned by Transferor and set forth in the
document entitled "Assignment of Technology".
(d) Executed and acknowledged Assignments with respect to the
Trademarks and trademark license agreements owned by
Transferor and identified in Schedule D.
(e) One (1) executed and acknowledged Assignment with respect to
the Copyrights.
(f) One (1) executed and acknowledged Assignment with respect to
the Improvements.
ARTICLE III. OBLIGATION AFTER TRANSFER
3.01 Further Transfers and Assurances. From time to time and after
the Transfer Date, Transferor shall execute, acknowledge and deliver any further
assignments, conveyances and other assurances, documents and instruments of
transfer, and take any other action consistent with this Agreement, reasonably
required to assign, transfer, convey, record and confirm to Transferee any and
all of the Assets, and Transferee shall execute, acknowledge and deliver any
further assurances, documents and instruments of assumption, and take any other
action
3
<PAGE> 4
consistent with this Agreement, reasonably required to transfer, assume and
confirm to Transferee any and all of the Assets. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not be deemed to act as a
transfer of any specific Asset, the transfer of which would constitute a
violation of applicable law or regulation or a material breach of an agreement
or obligation with or to a Third party. With respect to any such Asset,
Transferor and Transferee shall take all necessary and appropriate actions to
complete the transfer thereof as soon as practicable following the Transfer Date
in a manner consistent with the requirements of such law, regulation, agreement
or obligation. Anything in this Agreement to the contrary, Transferor shall not
be obligated to assign, transfer or convey in and to any specific Asset without
first obtaining all approvals, consents and waivers necessary for the valid
transfer thereof; and Transferor shall use all reasonable efforts (and
Transferee shall cooperate) to obtain such necessary approvals, consents and
waivers as soon as practicable; provided however, that any cost associated
therewith shall be borne by Transferor.
3.02 Cooperation After Transfer. Each party will cooperate, and
will use all reasonable efforts to have its officers, directors and other
employees cooperate with the other party at its request in furnishing
information, evidence, testimony and other assistance in connection with any
actions, proceedings, arrangements or disputes relating to adjustment of income
and other taxes of Transferor for all periods prior to the Transfer Date, and in
connection with any other actions, proceedings, arrangements or disputes
involving either party or based upon any of Transferor's contracts, agreements,
acts or omissions which were in effect or occurred on or prior to the Transfer
Date. Transferee shall permit Transferor and its authorized representatives,
accountants, attorneys and engineers to have full access to any reasonable time
or times to the books, records and other data relating to the Assets delivered
by Transferor to Transferee, and Transferor shall permit Transferee and its
authorized representatives,
4
<PAGE> 5
accountants, attorneys and engineers to have full access at any reasonable time
or times to any books, tax returns (but only insofar as they relate solely
or primarily to the Assets), records and other data of Transferor relating
to Assets. Each of the parties agrees to preserve the books, records and
data referred to in the preceding sentence for the period from and after
the Closing as prescribed in each parties' records retention policies in
effect on the Closing, and will not destroy any of the same at any
time without reasonable prior written notice to the other party and without
affording the other party a reasonable opportunity to make copies of or to
obtain books, records or other data so intended to be destroyed.
3.03 Confidentiality.
(a) Transferor shall be permitted to retain for record
purposes, one copy of all documents and the like
(such as computer programs) which may constitute the
Assets delivered or transferred hereunder and which
may contain confidential technical or business
information. However, except as permitted by express
written agreement between the parties, Transferor
shall not, directly or indirectly, use, permit any
Third Party to use or disclose to any Third Party any
confidential information contained in, or pertaining
to, the Assets owned by Transferee on and after the
Transfer Date, except when, after, and to the extent,
such information is or becomes generally available to
the public. Notwithstanding the foregoing, Transferor
may disclose such information to such of its
employees, attorneys and
5
<PAGE> 6
agents who require the same in the exercise of their
duties, and governmental authorities, to the extent
required by law; provided, however, that Transferor
gives Transferee not less than ten (10) days prior
written notice, and the opportunity to oppose such
disclosure.
(b) Transferor and Transferee shall each keep in
confidence all business and technical information
owned by the other which may be disclosed to it and
which is not part of the Assets, except when, after
and to the extent such information is or becomes
generally available to the public.
3.05 Recording of Documents. Transferee shall be responsible, at
Transferee's expense, for the filing or recording of such deeds, assignments,
instruments or documents delivered by Transferor hereunder, and for the
preparation and recording of such additional assignments, instruments or
documents as may be necessary or appropriate to perfect Transferee's title to or
interest in the Assets.
ARTICLE IV. MISCELLANEOUS
4.01 Entire Agreement; Modification; Waiver. This Agreement and the
attachments hereto constitute the entire agreement between the parties
pertaining to the subject matter contained herein and supercede all prior and
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both parties. No waiver of any of the provisions
of this Agreement shall constitute a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding
6
<PAGE> 7
unless executed in writing by the party making such waiver.
4.02 Effect of Headings. The subject headings of the Articles and
Sections of this Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
4.03 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is give, or on the fifty day after mailing if mailed to the party to
whom notice is to be given by first class mail, registered or certified, postage
pre-paid, property addressed as first set forth above. Any party may change its
address for purposes of this paragraph by giving the other party written notice
of the new address in the manner set forth above.
4.04 Assignment. This Agreement shall not be assignable without the
mutual consent of the parties.
4.05 Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware, without regard to its conflicts of laws, rules or
principles.
IN WITNESS WHEREOF, the parties have duly executed this Agreements as
of the date and year first above written.
UCAR CARBON TECHNOLOGY CORPORATION
(Transferor)
By: /s/ Corrado DeGasperis
Title: Controller
UCAR GRAPH-TECH INC.
(Transferee)
7
<PAGE> 8
By: John J. Wetula
Title: President
8
<PAGE> 9
SCHEDULE B TO EXHIBIT 10.11
[Omitted]
<PAGE> 10
Schedule C
[Omitted]
<PAGE> 11
SCHEDULE D TO EXHIBIT 10.11
[Omitted]
<PAGE> 1
Exhibit 10.12
COLLABORATION AGREEMENT
between
BALLARD POWER SYSTEMS INC.
and
UCAR CARBON COMPANY INC.
<PAGE> 2
-2-
COLLABORATION AGREEMENT
THIS AGREEMENT is made May 3, 1999
BETWEEN:
BALLARD POWER SYSTEMS INC., a Canadian corporation having an
office at 9000 Glenlyon Parkway, Burnaby, British Columbia,
Canada, V5J 5J9
("BPS")
AND:
UCAR CARBON COMPANY INC., a Delaware corporation having an
office at 3102 West End Avenue, Suite 1100, Nashville,
Tennessee 37203, USA
("UCAR CARBON")
WHEREAS:
(A) BPS has developed, is in the possession of and is the beneficial owner of,
substantial and valuable expertise, know-how and certain intellectual property
rights relating to the field of PEM Fuel Cells and the design, manufacture and
marketing of PEM Fuel Cells and components therefor for the generation of
electrical power for a variety of applications;
(B) BPS wishes to enhance its PEM Fuel Cell technology through the development
of improved fuel cell components;
(C) UCAR CARBON has developed, is in the possession of and is the beneficial
owner of, substantial and valuable expertise, know-how and certain intellectual
property rights relating to the field of flexible graphite and treated natural
graphite and sells such materials and articles made therefrom having mechanical,
physical, chemical and electrical properties suitable for a wide variety of
industrial uses;
(D) BPS and UCAR CARBON wish to co-operate in the research and development of
the Target Products for use in PEM Fuel Cells and derivatives thereof and have
entered into this Agreement for the purposes of the Collaboration;
(E) BPS intends to procure its supply of the Materials from UCAR CARBON for
itself and possibly also for certain of its Affiliates and licensees if the
development of the Target
<PAGE> 3
-3-
Products pursuant to the collaboration under this Agreement is successful;
(F) UCAR and BPS are parties to the Mutual Secrecy Agreement;
NOW THEREFORE this Agreement witnesses that the parties mutually covenant and
agree as follows:
PART 1
DEFINITIONS AND INTERPRETATIONS
DEFINITIONS
1.1 In this Agreement, including the recitals, except as otherwise expressly
provided or unless the context otherwise requires,
AFFILIATE, in relation to a specified Person, means a Person that
directly or indirectly controls, is under common control with, or is
controlled by the specified Person, and for the purposes hereof, a
Person will be deemed to control a corporation if
(a) securities of the corporation to which are attached more
than 50% of the votes that may be cast to elect directors of
the specified corporation or other rights to elect a majority
of the directors are held, other than by way of security
only, by or for the benefit of the Person, and
(b) the votes attached to those securities are sufficient, if
exercised, to elect a majority of the directors of the
corporation,
ARISING IPR [REDACTED]
BACKGROUND IPR [REDACTED]
BPS ARISING IPR [REDACTED]
BPS BACKGROUND IPR [REDACTED]
BUSINESS DAY means a day that is not a Saturday or a Sunday or a
British Columbia
<PAGE> 4
-4-
provincial, Canadian federal, a United States national or Tennessee
state, holiday,
CHIEF EXECUTIVE OFFICER means, in the case of BPS, BPS's Chief
Operating Officer and in the case of UCAR CARBON, UCAR CARBON's
President,
COLLABORATION means the collaboration between the parties described in
Section 2.1 and includes the collaborative activities of the parties
set forth in the SOW which occur from and after the Effective Date,
COLLABORATION PERIOD has the meaning ascribed to it in Section 2.3,
COMMITTEE has the meaning ascribed to it in Section 2.4,
CONFIDENTIAL INFORMATION means, in relation to a Person, information
known or used by such Person in connection with its business and
technology, including, but not limited to, such Person's Intellectual
Property, customer information, financial information, marketing
information, and information as to business opportunities and research
and development,
DISPUTE NOTICE has the meaning ascribed to it in Section 6.1,
EFFECTIVE DATE has the meaning ascribed to it in Section 2.3,
EVENT OF DEFAULT in relation to a party means an event of default
arising as a result of a party being subject to one or more of the
following circumstances:
(a) an order is made or a resolution is passed or a
petition is filed by such party for the liquidation,
dissolution or winding-up of such party,
(b) such party is in material breach of its obligations
under Part 4,
(c) such party commits a material default in observing or
performing any other material covenant, agreement or
condition of this Agreement on its part to be
observed or performed and, where such default is
curable, such party does not rectify or cure such
default within 30 days after receipt of written
notice from the other party to this Agreement
specifying such default;
(d) an execution, sequestration or any other process of
any court becomes enforceable against such party or
any distress or analogous process is levied upon any
material part of the property, assets and undertaking
of such party and any such process or distress is not
stayed or otherwise suspended by a court of competent
jurisdiction within 30 days and has, or could have, a
material adverse effect on the business or condition,
financial or otherwise, of such party;
<PAGE> 5
-5-
(e) such party applies to be put in bankruptcy, takes any
action that would permit its creditors to make an
application to put such party in bankruptcy, is
adjudged or declared bankrupt or makes an assignment
for the benefit of creditors, consents to a proposal
or similar action under any bankruptcy or insolvency
legislation applicable to it, or commences any other
proceedings relating to it under any reorganization,
arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction
whether now or hereafter in effect, or consents to
any such proceeding;
(f) a custodian, liquidator, receiver, receiver and
manager, receiver-manager, trustee or any other
person with similar powers is appointed for such
party or in respect of any material property or
assets or material part of the property or assets of
such party and not discharged within 30 days after
its appointment and before any action is taken by it
in respect of such property or assets which will
materially affect the rights of the parties to this
Agreement thereto; or
(g) a final, non-appealable, decision of any judicial,
administrative, governmental or other authority or
arbitrator is made which enjoins or restrains, or
renders illegal or unenforceable, the performance or
observance by such party of any material term of this
Agreement,
EXCLUSIVE PERIOD has the meaning ascribed to it in Section 2.9,
INTELLECTUAL PROPERTY means in relation to a Person, each patent,
patent application, industrial design, invention, design, trade
secret, idea, work, methodology, technology, innovation, creation,
concept, moral right, development drawing, research, analysis,
know-how, experiment, copyright, data, formula, method, procedure,
process, system or technique of such Person but does not include
trademarks or tradenames,
IPR means Intellectual Property rights,
MATERIALS [REDACTED]
MUTUAL SECRECY AGREEMENT means the secrecy agreement made effective
May 17, 1996, a copy of which is annexed hereto as Schedule C,
<PAGE> 6
-6-
NOTICE has the meaning ascribed to it in Section 8.4,
PEM FUEL CELL means a solid polymer fuel cell and includes a direct
oxidation fuel cell,
PERSON means an individual, corporation, body corporate, firm, limited
liability company, partnership, syndicate, joint venture, society,
association, trust or unincorporated organization or trustee or other
such legal representative,
PROJECT MANAGER has the meaning ascribed to it in Section 2.7,
SOW means the Statement of Work annexed hereto as Schedule A,
SUPPLY AGREEMENT DEADLINE DATE has the meaning ascribed to it in
Section 5.1,
TARGET PRODUCT means an electrically conductive fuel cell separator
plate developed pursuant to the Collaboration utilizing any of the
Materials,
UCAR ARISING IPR [REDACTED]
UCAR BACKGROUND IPR [REDACTED]
INTERPRETATION
1.2 In this Agreement, except as otherwise expressly provided or unless the
context otherwise requires,
(a) "this Agreement" means this Collaboration Agreement as from time
to time supplemented or amended by one or more agreements entered into
pursuant to the applicable provisions hereof,
(b) the headings in this Agreement are inserted for convenience only
and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof,
(c) the word "including", when following any general statement or
term, is not to be construed as limiting the general statement or term
to the specific items or matters set forth or to similar items or
matters, but rather as permitting the general statement or
<PAGE> 7
-7-
term to refer to all other items or matters that could reasonably fall
within its broadest possible scope,
(d) except where otherwise specified, all references to currency mean
currency of the United States of America,
(e) a reference to a statute includes all regulations made thereunder,
all amendments to the statute or regulations in force from time to
time, and any statute or regulation that supplements or supersedes
such statute or regulations,
(f) a reference to an entity includes any successor to that entity,
(g) words importing the masculine gender include the feminine or
neuter, words in the singular include the plural, words importing a
corporate entity include individuals, and vice versa,
(h) a reference to "approval", "authorization" or "consent" means
written approval, authorization or consent,
(i) a reference to a Part is to a Part of this Agreement and the
symbol Section followed by a number or some combination of numbers and
letters refers to the section, paragraph, subparagraph, clause or
subclause of this Agreement so designated.
SCHEDULES
1.3 The following schedules are incorporated in to this Agreement by reference
and form a part hereof:
Schedule A - Statement of Work
Schedule B - List of Materials
Schedule C - Mutual Secrecy Agreement
PART 2
COLLABORATION
COLLABORATION
2.1 BPS and UCAR CARBON will work jointly and individually at their respective
facilities and will co-operate in their research and development activities as
may be required or expedient to produce or create commercially viable versions
of the Target Products primarily for use in PEM Fuel Cells.
LIMITED PURPOSE
<PAGE> 8
-8-
2.2 The Collaboration will be for the purposes of research and development only,
will include the activities described in the SOW, and will encompass all
research, design, development, improvement and other experimentation and
performance testing of the Target Products during the Collaboration Period and
the provision of reports and advice by the parties to one another with respect
to the development of such products and techniques and methods of their
manufacture and exploitation.
COLLABORATION TERM
2.3 [REDACTED]
STEERING COMMITTEE
2.4 The parties will establish a steering committee (the "Committee") comprising
two representatives of each party. Each party may replace, from time to time,
any member appointed by it on the Committee by giving written notice thereof to
the other party. The Committee will meet regularly but not less than twice per
year and meetings of the Committee may be held by telephone conference. The
decisions of the Committee will be made unanimously by all of its members. All
proceedings and decisions of the Committee will be recorded in minutes which
will be signed by at least one member of the Committee appointed by each party.
DUTIES OF COMMITTEE
2.5 The Committee will, among other things,
(a) monitor the progress and review the performance of each of the
parties,
(b) oversee all work to be performed by each of the parties pursuant
to the Collaboration (including, but not limited to, the work for
which each party is responsible as may be described in any work-plan
pertaining to the Collaboration),
(c) review patent-related and other intellectual property issues and
define the parties' general strategy concerning the same,
(d) promptly resolve problems and disputes submitted to the Committee
by either party,
(e) evaluate the results of each phase of the Collaboration and
discuss all technical
<PAGE> 9
-9-
issues arising with regard to the Collaboration,
(f) determine the ownership of Arising IPR which may result pursuant
to the Collaboration but only to the extent the same is not provided
for in this Agreement,
(g) modify the SOW as and when deemed necessary,
(h) review, on a regular basis, the cost of developing and producing
the Materials and the projected date of commercialization of PEM Fuel
Cells containing Target Products and make recommendations to the
parties regarding the same, and
(i) review, and where appropriate approve the written summaries
prepared by the Project Managers pursuant to Section 2.7(d).
WORK AND COSTS
2.6 Each party will use all reasonable efforts to successfully, diligently and
on a timely basis, carry out the portion of the work for which it is responsible
as set forth in the SOW for the achievement of the objectives of the
Collaboration. Unless otherwise agreed, each party will bear all its own costs
and expenditures in connection with its activities pursuant to the Collaboration
except that jointly incurred costs will be borne by the parties equally.
PROJECT MANAGER
2.7 Each of the parties will appoint and maintain, until the expiry of the
Collaboration Period, a project manager ("Project Manager") and may from time to
time change its Project Manager, upon prior written notice to the other party.
Each party's Project Manager will be responsible for that party's performance
under this Agreement and will coordinate and cooperate with the Committee
concerning the management, coordination and administration of the activities of
such party under this Agreement. Specifically, the Project Managers will
(a) exchange results and all other relevant information arising
pursuant to the Collaboration,
(b) specify detailed objectives of the Collaboration, the work to be
performed by each party and relevant specifications and appropriate
targets, to the extent deemed necessary for the success of the
Collaboration,
(c) maintain books and written records of the dates on which
technology is disclosed by one party to the other pursuant to the
Collaboration, and
(d) jointly prepare a written summary for the Committee every six
months on the results and progress of the Collaboration.
<PAGE> 10
-10-
PRODUCT DEVELOPMENT LEAD TIME
2.8 [REDACTED]
LICENSE BY UCAR
2.9 [REDACTED]
SUBLICENSE BY BPS
2.10 [REDACTED]
2.11 [REDACTED]
PART 3
INTELLECTUAL PROPERTY
DISCLOSURE OF IPR FOR THE COLLABORATION
3.1 Each party will disclose to the other its Background IPR but only to the
extent strictly necessary for the Collaboration.
BPS'S LICENSE TO UCAR CARBON FOR COLLABORATION
3.2 BPS hereby grants to UCAR CARBON a non-exclusive, non-transferable,
royalty-free, right (without the right to sub-license) to use, subject to
Section 3.1, the BPS Background IPR and the BPS Arising IPR (in each case
subject to the confidentiality obligations contained in Part 4) until the end of
the Collaboration Period for the sole purpose of carrying out the work under the
Collaboration. For greater certainty the license granted by BPS to UCAR CARBON
under this Section 3.2 does not include any right to manufacture, sell or
distribute products using, or to otherwise exploit, the BPS Background IPR or
the BPS Arising IPR for any other purpose.
UCAR CARBON'S LICENSE TO BPS FOR COLLABORATION
3.3 UCAR CARBON hereby grants to BPS a non-exclusive, non-transferable,
royalty-free, right (without the right to sub-license) to use, subject to
Section 3.1, the UCAR
<PAGE> 11
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Background IPR and the UCAR Arising IPR (in each case subject to the
confidentiality obligations contained in Part 4) until the end of the
Collaboration Period for the sole purpose of carrying out the work under the
Collaboration. For greater certainty, except as otherwise set forth in
Section 2.9 and Part 7, the license granted by UCAR CARBON to BPS under this
Section 3.3 does not include any right to manufacture, sell or distribute
products using, or to otherwise exploit, the UCAR Background IPR or the UCAR
Arising IPR for any other purpose.
OWNERSHIP OF ARISING IPR
3.4 Where pursuant to the Collaboration any Intellectual Property which
specifically relates to the Materials or the Target Products is invented,
discovered, improved or otherwise developed or made by one party, such party
will disclose the same to the other. Regardless of inventorship, ownership of
all Intellectual Property in any such invention, discovery, improvement or
development will vest immediately and is hereby assigned in accordance with the
definitions of BPS Arising IPR and UCAR Arising IPR. To this end the parties
will execute or cause to be executed such deeds, documents, instruments,
assignments and moral rights waivers as may be necessary to effect the intent of
this Section 3.4.
PATENTS
3.5 Each party that is entitled to ownership of any Intellectual Property
created pursuant to the Collaboration as described in Section 3.4 will, at its
option, prosecute patents with respect to the same. Each party will execute all
such documents, execute or obtain such assignments and waivers, including
waivers of moral rights, and do all such other things as are reasonably
requested by the owner of such Intellectual Property in connection with any
application or prosecution of patents in respect of the same and will assist the
owner in all respects necessary to enable filing and prosecution of any such
application. The owner will be responsible for filing, prosecuting and
maintaining patent applications it files.
CONSENT TO USE OF CONFIDENTIAL INFORMATION
3.6 Neither party's patent applications may include any Background IPR, Arising
IPR or Confidential Information of the other without the express written consent
of the other party.
INFRINGEMENT CLAIM
3.7 If during the Collaboration Period either party discovers any third party
infringement of IPR belonging to either party, it will promptly notify the other
party.
PART 4
CONFIDENTIALITY
<PAGE> 12
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CONFIDENTIALITY OBLIGATIONS
4.1 Each party (for purposes of this Part 4, the "Recipient"), at all times
during the Collaboration Period and for a period of ten years after the expiry
thereof,
(a) will, and will ensure that each of its directors, officers,
employees, Affiliates, licensees, including sublicensees
(collectively, the "Recipient's Agents") will, hold in confidence and
keep confidential the Confidential Information of a party (the
"Disclosing Party") disclosed to it by the Disclosing Party,
(b) will not, and will ensure that the Recipient's Agents will not,
directly or indirectly, use or disclose any such Confidential
Information except to the extent that it is strictly necessary for the
Collaboration,
(c) will cause the Recipient's Agents that are recipients of or
exposed to such Confidential Information, to execute confidentiality
agreements to protect the same,
(d) will not, and will ensure that the Recipient's Agents will not,
except to the extent necessary for the Collaboration, make copies of
or otherwise reproduce such Confidential Information, and
(e) will, and will ensure that each of the Recipient's Agents will,
use commercially reasonable best efforts to maintain all such
Confidential Information in a manner so as to protect the same against
wrongful disclosure, misuse, espionage and theft.
EXCEPTIONS FOR CONFIDENTIALITY
4.2 Nothing in this Agreement will prevent the Recipient or the Recipient's
Agents from making use of or disclosing any Confidential Information disclosed
to them by the Disclosing Party
(a) which is or becomes generally available to the public through no
breach of this Agreement or any other obligation of the Recipient or
the Recipient's Agents to the Disclosing Party,
(b) of which the Recipient or the Recipient's Agents had knowledge
before the date of this Agreement, as evidenced by competent proof,
unless the same was disclosed to the Recipient or the Recipient's
Agents by the Disclosing Party,
(c) of which the Recipient or the Recipient's Agents obtained
knowledge from a third party, as evidenced by competent proof, unless
such third party obtained such Confidential Information in violation
of any duty of confidence owed to the Disclosing Party, or
(d) which is required to be disclosed pursuant to law or a rule,
regulation, policy or
<PAGE> 13
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order of a governmental authority having jurisdiction or pursuant to a
final order or judgment of a court of competent jurisdiction and in
such case the parties will cooperate with one another to obtain an
appropriate protective order or other reliable assurance that
confidential treatment will be afforded to such Confidential
Information.
EMPLOYMENT RELATIONS
4.3 Neither party will, during the Collaboration Period and for a period of two
years next after the expiry thereof, solicit for employment any individual who
is, at the time of such solicitation, employed by the other party or its
Affiliates nor will such party, directly or indirectly, induce any such
individual to leave his or her employment. Nothing herein will prevent a party
from employing any such employee so long as no solicitation or inducement has
been made to such employee by or on behalf of such party.
REASONABLE RESTRICTION
4.4 Each party agrees that the restrictions contained in this Part 4 are
reasonable for the protection of the respective legitimate business interests of
the parties.
NON-DISCLOSURE OF COLLABORATION
4.5 Except as may be required by law or applicable securities regulatory
authorities, neither party will make public the existence of this Agreement or
the Collaboration hereunder or the negotiations leading to or pursuant to this
Agreement, without the written consent of the other party. Notwithstanding the
foregoing, as soon as reasonably practicable after the execution by the parties
of an agreement governing the supply of the Materials by UCAR CARBON to BPS as
contemplated in Section 5.1, each party will be entitled to make public the
existence of such agreement provided that the form and substance of any such
publicity is first approved by the other party.
MUTUAL SECRECY AGREEMENT
4.6 The provisions of the Mutual Secrecy Agreement (and not Section 4.1 and
Section 4.2 hereof) will apply to all "Proprietary Information" (as defined in
such agreement) disclosed by the parties to one another before the Effective
Date notwithstanding that such Proprietary Information may be disclosed again as
Confidential Information under this Agreement.
ADDITIONAL CONFIDENTIALITY OBLIGATION OF UCAR CARBON
4.7 During the Exclusive Period, UCAR CARBON will not use or disclose, or permit
the use or disclosure of, any IPR that are the subject matter of the license
granted by UCAR to BPS under Section 2.9 other than for the purposes specified
in Section 2.9 and Section 2.10.
<PAGE> 14
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PART 5
SUPPLY
SUPPLY
5.1 [REDACTED]
PART 6
DISPUTE RESOLUTION
INITIATION OF PROCESS
6.1 If at any time a dispute between the parties with respect to any matter
relating to this Agreement arises, a party that wishes that the issue be
considered further may give written notice (the "Dispute Notice") to the other
and to the Committee requiring that such issue or dispute be decided pursuant to
this Part 6.
REFERRAL TO COMMITTEE
6.2 If a Dispute Notice is given, either party may, in the first instance, ask
the Committee to initiate discussions with a view to settling the issue or
matter. A decision reached by the Committee and communicated by it in writing to
the parties will be binding on the parties and will be implemented.
REFERRAL TO CHIEF EXECUTIVE OFFICERS
6.3 If no decision is communicated by the Committee within 30 days after such
issue or dispute is referred to it, either party may at any time before a
decision thereon is so communicated, ask the Chief Executive Officers of each of
the parties to initiate discussions with a view to settling the issue or matter.
Once the issue or dispute is referred to the Chief Executive Officers, the
Committee will no longer have jurisdiction to decide on the issue. A decision
reached by such Chief Executive Officers and communicated by them in writing to
the parties will be binding on the parties and will be implemented.
<PAGE> 15
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SUBMISSION TO ARBITRATION
6.4 If no decision is communicated by the Chief Executive Officers within 30
days after such issue or dispute is referred to them, either party may at any
time before a decision thereon is so communicated and less than 120 days after
delivery of the Dispute Notice, by further notice given to the other, submit the
issue or dispute for determination by a three member arbitration panel in
accordance with the rules of arbitration of the International Chamber of
Commerce.
ACCEPTANCE AND IMPLEMENTATION
6.5 Each of the parties will accept and proceed in good faith diligently to
implement the award or decision of the arbitrators on an arbitration pursuant to
Section 6.4.
PLACE OF ARBITRATION
6.6 All arbitration proceedings will be conducted in San Francisco, California
or in such other place as the parties may agree.
LEGAL PROCEEDINGS
6.7 A legal proceeding commenced by a party to this Agreement in respect of an
issue or dispute that may be arbitrated under this Agreement will be stayed
until the time during which arbitration may be initiated has expired or, if
arbitration is initiated, a decision on the arbitration is delivered or the
arbitration process has otherwise ended.
EXCLUSIONS
6.8 This Part 6 will not apply to the grant of provisional remedies, including
injunctions, restraining orders and specific performance, and each party
reserves its right to commence such action or seek such remedies from a court of
competent jurisdiction.
PART 7
TERMINATION
TERMINATION
7.1 Subject to earlier termination as provided in this Section 7.1, the
Collaboration hereunder will end as provided in Section 2.3. Thereafter the
Collaboration may be renewed year-to-year by mutual agreement. Notwithstanding
the foregoing, the Collaboration hereunder may be terminated by either party,
(a) [REDACTED]
<PAGE> 16
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(b) by written notice to the other, if the other becomes the subject
to an Event of Default, or
(c) by written notice to the other, if no agreement for the supply of
the Materials by UCAR CARBON to BPS has been concluded by the Supply
Agreement Deadline Date, or
(d) by written notice to the other, if the parties
(i) have completed the work required of them under the SOW
before the end of the Collaboration Period, and
(ii) cannot agree on additional work to be done or the
milestones or other deliverables to be met, during the
balance of the Collaboration Period.
RIGHTS AND OBLIGATIONS OF THE PARTIES AFTER TERMINATION
7.2 Notwithstanding the foregoing, all rights and obligations of the parties
accruing before the effective date of the termination of the Collaboration
herein and all rights and obligations expressly stated to continue after or
accrue as a result of, the termination of the Collaboration, will survive the
effective date of such termination and will continue in full force and effect,
provided that
(a) if UCAR CARBON terminates the Collaboration herein without cause,
or BPS terminates the Collaboration as a result of UCAR CARBON being
the subject of an Event of Default,
(i) [REDACTED]
(ii) [REDACTED]
(b) if BPS terminates the Collaboration herein without cause, or UCAR
CARBON terminates the Collaboration as a result of BPS being the
subject of an Event of Default,
(i) [REDACTED]
<PAGE> 17
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(ii) [REDACTED]
(c) if the supply agreement contemplated in Section 5.1 is not
concluded on or before the Supply Agreement Deadline Date, UCAR will,
if so requested by BPS, continue supplying the Materials to BPS on
commercially reasonable terms, at commercially reasonable prices for a
period not exceeding 6 months. If the parties fail to agree on such
terms or prices within 60 days after the Supply Agreement Deadline
Date, the matter will be determined by arbitration pursuant to
Section 6.4, mutatis mutandis,
(d) Section 7.2(a) and (b), Section 2.8, Section 2.9 and Section 2.10
will be suspended if the agreement for the supply of the Materials by
UCAR CARBON to BPS, as contemplated in Section 5.1 has not been
concluded on or before the Supply Agreement Deadline Date; provided
that
(i) subject to Section 7.2(d)(ii), such provisions will
reapply immediately following the execution of any such
agreement at any time after such date, and
(ii) such provisions will be deemed cancelled if such an
agreement has not been concluded within 9 months after the
Supply Agreement Deadline Date, and
(e) for greater certainty, Section 7.2(a) and Section 7.2(b) will not
apply if the Collaboration is terminated pursuant to Section 7.1(d).
RETURN OF CONFIDENTIAL INFORMATION
7.3 Except as may be required for the purposes of effectively utilizing any
licensing rights arising upon or continuing after the end of the Collaboration,
forthwith upon termination of the Collaboration, each party will, upon request,
return or cause to be returned to the other all Confidential Information of the
other in its possession or under its control, regardless of form, including all
known and existing copies and reproductions thereof.
PART 8
GENERAL
<PAGE> 18
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MODIFICATIONS, APPROVALS AND CONSENTS
8.1 No amendment, modification, supplement, termination or waiver of any
provision of this Agreement will be effective unless in writing signed by the
appropriate party and then only in the specific instance and for the specific
purpose given.
FURTHER ASSURANCES
8.2 The parties will execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Agreement.
ENTIRE AGREEMENT
8.3 The provisions in this Agreement constitute the entire agreement between the
parties hereto and supersede all previous expectations, understandings,
communications, representations and agreements whether verbal or written between
the parties.
NOTICES
8.4 Every notice, request, demand, direction or other communication (each, for
the purposes of Section 8.4, Section 8.5 and Section 8.6, a "Notice") required
or permitted to be given pursuant to this Agreement will be deemed to be well
and sufficiently given if in writing and delivered by hand (including recognized
overnight courier service) or transmitted by facsimile, in each case addressed
as follows:
(a) if to BPS at:
9000 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 539
Attention: Chief Operating Officer
Facsimile: (604) 412-3131
with a copy to BPS's Vice-President and General Counsel at
the same address and facsimile number; and
(b) if to UCAR CARBON at:
3102 West End Avenue,
Suite 1100
Nashville, Tennessee
USA 37203
Attention: The President
Facsimile: (615) 760-7797
<PAGE> 19
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with a copy to UCAR CARBON's Vice-President and General
Counsel at the same address and facsimile number;
or to such other address or transmission receiving station as is specified by
the particular party by Notice to the others.
DEEMED RECEIPT
8.5 Any Notice delivered or sent as aforesaid will be deemed conclusively to
have been effectively given and received on the day Notice was delivered or sent
as aforesaid if it was delivered or sent on a day that was a Business Day or on
the next day that is a Business Day if it was delivered or sent on a day that
was not a Business Day.
CHANGE OF ADDRESS
8.6 A party may at any time, by Notice to the others, change its address to some
no less convenient address and will so change its address whenever its address
ceases to be suitable for delivery by hand.
ENUREMENT
8.7 This Agreement will enure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns.
APPLICABLE LAW
8.8 This Agreement will be deemed to have been made in British Columbia, Canada
and the construction, validity and performance of this Agreement will be
governed in all respects by the laws of British Columbia and applicable laws of
Canada. The application of the provisions of the United Nations Convention on
Contracts for the International Sale of Goods are hereby excluded.
ATTORNMENT
8.9 Each party irrevocably attorns to the exclusive jurisdiction of the courts
of British Columbia, Canada and all courts having appellate jurisdiction
thereover in respect of any proceeding arising out of or relating to this
Agreement.
FORCE MAJEURE
8.10 Neither party will be liable to the other for default or delay in the
performance of its obligations under this Agreement if such default or delay is
caused by fire, strike, riot, war, act of God, delay of carriers, governmental
orders or regulation, complete or partial shutdown of plant by reason of
inability to obtain sufficient raw material or power, or any other occurrence
beyond the reasonable control of such party. The party whose performance is
<PAGE> 20
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prevented by any such occurrence will notify the other party of the same in
writing as soon as is reasonably possible after the commencement thereof, will
provide the other with full written particulars of such occurrence and attempts
made to remedy the same, will use commercially reasonable best efforts to remedy
such occurrence with all reasonable dispatch and, upon cessation of the
occurrence, will give prompt written notice to the other party of the same.
SEVERABILITY
8.11 If any provision contained in this Agreement is found by any court or
arbitrator for any reason, to be invalid, illegal or unenforceable in any
respect in any jurisdiction,
(a) the validity, legality and enforceability of such provision will
not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the
remaining provisions contained herein will not in any way be affected
or impaired thereby, unless in either case as a result of such
determination this Agreement would fail in its essential purpose, and
(b) the parties will use their best efforts to substitute for any
provision that is invalid, illegal or unenforceable in any
jurisdiction a valid and enforceable provision which achieves to the
greatest extent possible the economic, legal and commercial objectives
of such invalid, illegal or unenforceable provision and of this
Agreement and, failing the agreement of the parties on such a
substitution within 30 days after the finding of the court or
arbitrator, either party may refer the matter for dispute resolution
under Part 6.
COUNTERPARTS
8.12 This Agreement may be executed in counterparts or by facsimile, each of
which will together, for all purposes, constitute one and the same instrument,
binding on the parties, and each of which will together be deemed to be an
original, notwithstanding that both parties are not signatories to the same
counterpart or facsimile.
ASSIGNMENT
8.13 Neither party may assign any right, benefit or interest in this Agreement
without the written consent of the other party, and any purported assignment
without such consent will be void.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year
<PAGE> 21
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first above written.
BALLARD POWER SYSTEMS INC.
By: /s/
---
Its: Vice President and General Counsel
----------------------------------
UCAR CARBON COMPANY INC.
By: /s/ Peter B. Mancino
--------------------
Its: Vice President
--------------
<PAGE> 22
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Schedule A
Statement of Work
[REDACTED]
<PAGE> 23
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Schedule B
List of Materials
[REDACTED]
<PAGE> 24
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Schedule C
MUTUAL SECRECY AGREEMENT
This AGREEMENT effective as of the 17th day of May, 1996, is between
UCAR CARBON COMPANY INC., a Delaware corporation, having offices at 39 Old
Ridgebury Road, Danbury, Connecticut O68l7 (hereinafter referred to as "UCAR
CARBON"); and BALLARD POWER SYSTEMS INC., having an office at 9000 Glenlyon
Parkway, Burnaby, B.C. Canada V5J 5J9 (hereinafter referred to as "BALLARD").
WHEREAS, UCAR CARBON possesses certain proprietary information
(hereinafter UCAR CARBON Proprietary Information) relating to the manufacture of
flexible graphite for use in fuel cells:
WHEREAS, BALLARD possesses certain proprietary information
(hereinafter BALLARD Proprietary Information) relating to fuel cells and
components for fuel cells.
WHEREAS, UCAR CARBON and BALLARD desire to exchange such proprietary
information (hereinafter individually and collectively referred to as
"Proprietary Information") for the purpose of UCAR CARBON supplying flexible
graphite produced employing UCAR CARBON Proprietary Information to BALLARD under
a separate purchase order.
WHEREAS, each party is willing to disclose to the other
<PAGE> 25
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party its Proprietary Information for the specific purposes of this Agreement
under the following conditions:
1. During the term of this Agreement, the receiving party agrees to
hold in confidence and not disclose to any person or persons, other than its
employees with a need to know, or use except for the purpose of this agreement,
for a period of fifteen (15) years from the date of each disclosure, any and all
Proprietary Information disclosed in writing and identified as Proprietary
Information by the disclosing party. If Proprietary Information is disclosed
orally or in other than written form, it must be identified as Proprietary
Information at the time of disclosure and summarized in writing and identified
as Proprietary Information by the disclosing party within thirty (30) days from
the date of the disclosure. It is understood that the foregoing obligation of
confidentiality does not apply to:
a) information which at the time of disclosure is in the public domain;
b) information which is published or otherwise becomes part of the
public domain through no fault of the receiving party after the
disclosure hereunder;
c) information which the receiving party can demonstrate by reasonably
convincing evidence is already known or in the possession of the
receiving party at the time of disclosure hereunder;
d) information that the receiving party can show was received by it
after the time of the disclosure hereunder from a third party on a
non-confidential basis who did not acquire such information directly
or indirectly from the disclosing party under an obligation of
confidence; or
<PAGE> 26
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e) information that is developed by an employee of the receiving party
independent of any such disclosure under this Agreement.
2. The receiving party agrees to use at least the same degree of care
in maintaining the other party's Proprietary Information confidential as it does
for maintaining the confidentiality of its own Proprietary Information of a
similar nature.
3. The receiving party agrees not to copy any Proprietary Information
without the written permission of the disclosing party, and shall return such
Proprietary Information and any copies when requested to do so by the disclosing
party during the term of this Agreement
4. No license, express or implied, is granted by either party to the
other party under any patent, trade secret or copyright now or hereafter owned
by either party under this Agreement.
5. This Agreement shall be construed and interpreted, and its
performance shall be governed by substantive laws of the state of Connecticut,
U.S.A., without recourse to its conflict of laws, rules or principles.
<PAGE> 27
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6. Either party upon thirty (30) days notice given in writing to the
other party may terminate this Agreement. However, termination of the Agreement
will not affect the confidentiality and non-use obligations of either party.
AGREED:
BALLARD POWER SYSTEMS INC. UCAR CARBON COMPANY INC.
By /s/ Keith B. Prater By/s/ R.M. Flowers
------------------- ----------------
Name Keith B. Prater Name R.M. Flowers
--------------- ------------
Title Vice President Title Dir.-Worldwide Tech.
-------------- --------------------
Date 21Jun96 Date July 2, 1996
------- ------------
<PAGE> 28
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PART 1
DEFINITIONS AND INTERPRETATIONS
Definitions 2
Interpretation 6
Schedules 7
PART 2
COLLABORATION
Collaboration 7
Limited Purpose 7
Collaboration Term 8
Steering Committee 8
Duties of Committee 8
Work and Costs 9
Project Manager 9
Product Development Lead Time 9
License by Ucar 10
Sublicense by BPS 10
PART 3
INTELLECTUAL PROPERTY
Disclosure Of IPR for the Collaboration 11
BPS's License to UCAR CARBON for Collaboration 11
UCAR CARBON's License to BPS for Collaboration 11
Ownership of Arising IPR 11
Patents 12
Consent to Use of Confidential Information 12
Infringement Claim 12
PART 4
CONFIDENTIALITY
Confidentiality Obligations 12
Exceptions for Confidentiality 13
Employment Relations 13
Reasonable Restriction 14
Non-Disclosure of Collaboration 14
Mutual Secrecy Agreement 14
Additional Confidentiality Obligation of UCAR CARBON 14
<PAGE> 29
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PART 5
SUPPLY
Supply 14
PART 6
DISPUTE RESOLUTION
Initiation of Process 15
Referral to Committee 15
Referral to Chief Executive Officers 15
Submission to Arbitration 15
Acceptance and Implementation 16
Place of Arbitration 16
Legal Proceedings 16
Exclusions 16
PART 7
TERMINATION
Termination 16
Rights and obligations of the Parties After Termination 17
Return of Confidential Information 18
PART 8
GENERAL
Modifications, Approvals and Consents 19
Further Assurances 19
Entire Agreement 19
Notices 19
Deemed Receipt 20
Change of Address 20
Enurement 20
Applicable Law 20
Attornment 20
Force Majeure 21
Severability 21
Counterparts 21
Assignment 22
An extra section break has been inserted above this paragraph. Do not delete
this section break if
<PAGE> 30
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you plan to add text after the Table of Contents/Authorities. Deleting this
break will cause Table of Contents/Authorities headers and footers to appear on
any pages following the Table of Contents/Authorities.
<PAGE> 1
Exhibit 10.13
SUPPLY AGREEMENT
THIS AGREEMENT is made the _______ day of _______________, 1999
BETWEEN:
UCAR CARBON COMPANY INC., a Delaware corporation having an office at
3102 West End Avenue, Suite 1100, Nashville, Tennessee, 37203, USA
("UCAR CARBON")
AND:
BALLARD POWER SYSTEMS INC., a company organized and existing under
the laws of Canada, the main office of which is at 9000 Glenlyon
Parkway, Burnaby, British Columbia, Canada V5J 5J9
("BPS")
WHEREAS:
(A) UCAR CARBON and BPS have entered into the Collaboration Agreement for the
development of Target Products;
(B) BPS seeks an assured source of supply of the Materials in connection with
the development and manufacture of electrically conductive fuel cell separator
plates;
(C) BPS wishes to purchase from UCAR CARBON, and UCAR CARBON wishes to supply to
BPS, the Materials, on the terms and subject to the conditions set forth in this
Agreement;
NOW THEREFORE the parties covenant and agree as follows:
<PAGE> 2
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PART 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS
1.1 In this Agreement, including the recitals and schedules, except as expressly
provided or unless the context otherwise requires,
AFFILIATE, in relation to a specified Person, means a Person that directly
or indirectly controls, is under common control with, or is controlled by
the specified Person, and for the purposes hereof, a Person will be deemed
to CONTROL a corporation if
(a) securities of the corporation to which are attached more than
50% of the votes that may be cast to elect directors of the
specified corporation or other rights to elect a majority of the
directors are held, other than by way of security only, by or for
the benefit of the Person, and
(b) the votes attached to those securities are sufficient, if
exercised, to elect a majority of the directors of the corporation,
BUSINESS DAY means a day that is not a Saturday, a Sunday or a British
Columbia provincial, Canadian federal, United States national or Tennessee
state, holiday,
CHIEF EXECUTIVE OFFICER means, in the case of BPS, BPS's Chief Operating
Officer and in the case of UCAR CARBON, UCAR CARBON's President,
COLLABORATION has the meaning ascribed to it in the Collaboration
Agreement,
COLLABORATION AGREEMENT means the Collaboration Agreement between UCAR
CARBON and BPS made May 3, 1999,
COMMENCEMENT DATE means the date of execution of this Agreement,
CONFIDENTIAL INFORMATION means, in relation to a Person, information known
or used by such Person in connection with its business or technology,
including, but not limited to, such Person's Intellectual Property,
customer information, financial information, marketing information, and
information as to business opportunities and research and development,
DISCLOSING PARTY has the meaning ascribed to it in Section 6.1,
EVENT OF DEFAULT in relation to a party means an event of default arising
as a result of a party
<PAGE> 3
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being subject to one or more of the following circumstances:
(a) an order is made or a resolution is passed or a petition is
filed by such party for the liquidation, dissolution or
winding-up of such party,
(b) such party is in material breach of its obligations under Part
6,
(c) such party commits a material default in observing or
performing any other material covenant, agreement or condition
of this Agreement on its part to be observed or performed and,
where such breach is curable, does not rectify or cure such
breach within 30 days after receipt of written notice from the
other party to this Agreement specifying such breach;
(d) an execution, sequestration or any other process of any
court becomes enforceable against such party or any
distress or analogous process is levied upon any material
part of the property, assets or undertaking of such party
and any such process or distress is not stayed or otherwise
suspended by a court of competent jurisdiction within 30
days and has, or could have, a material adverse effect on
the business or condition, financial or otherwise, of such
party;
(e) such party applies to be put in bankruptcy, takes any
action that would permit its creditors to make an
application to put such party in bankruptcy, is adjudged or
declared bankrupt or makes an assignment for the benefit of
creditors, consents to a proposal or similar action under
any bankruptcy or insolvency legislation applicable to it,
or commences any other proceedings relating to it under any
reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction whether now or hereafter in effect, or
consents to any such proceeding;
(f) a custodian, liquidator, receiver, receiver and manager,
receiver-manager, trustee or any other person with similar
powers is appointed for such party or in respect of any
material property or assets or material part of the
property or assets of such party and not discharged within
30 days after its appointment and before any action is
taken by it in respect of such property or assets which
will materially affect the rights of the parties to this
Agreement thereto;
(g) a final, non-appealable, decision of any judicial,
administrative, governmental or other authority or arbitrator
is made which enjoins or restrains or renders illegal or
unenforceable, the performance or observance by such party of
any material term of this Agreement;
<PAGE> 4
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EXCLUSIVE LICENSE [REDACTED]
FIRST YEAR MATERIALS FORECAST [REDACTED]
FIRST YEAR MATERIALS PRICING [REDACTED]
FORCE MAJEURE means an act of God, strike, lockout or other industrial
disturbance, war, blockade, insurrection, riot, earthquake, typhoon,
hurricane, flood, fire, explosion or other similar occurrence beyond the
reasonable control of a party which prevents such party from performing
its obligations under the Agreement,
INTELLECTUAL PROPERTY means in relation to a Person, each patent, patent
application, industrial design, invention, design, trade secret, idea,
work, methodology, technology, innovation, creation, concept, moral right,
development drawing, research, analysis, know-how, experiment, copyright,
data, formula, method, procedure, process, system or technique of such
Person, but does not include trademarks or tradenames,
LICENSE has the meaning ascribed to it in Section 5.1,
MATERIALS [REDACTED]
MUTUAL SECRECY AGREEMENT has the meaning ascribed to it in the
Collaboration Agreement,
NOTICE has the meaning ascribed to it in Section 9.4,
PERSON means an individual, corporation, body corporate, firm, limited
liability company, partnership, syndicate, joint venture, society,
association, trust or unincorporated organization or trustee or other such
legal representative,
PEM FUEL CELL means a solid polymer fuel cell and includes a direct
oxidation fuel cell,
RECIPIENT has the meaning ascribed to it in Section 6.1,
RECIPIENT'S AGENTS has the meaning ascribed to it in Section 6.1(a),
<PAGE> 5
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SPECIFICATIONS means BPS's specifications for the Materials as set forth
in Schedule A or such other specifications for the same as the parties may
agree from time to time,
SUPPLIER EVALUATION SYSTEM means at any particular time, BPS's then
existing standard of evaluating supplier performance and product quality,
the current criteria in respect of which is set forth in Schedule D,
TARGET PRODUCT means an electrically conductive fuel cell separator plate
developed pursuant to the Collaboration utilizing any of the Materials,
TERMS AND CONDITIONS means the terms and conditions of purchase set forth
in Section 3.1 as may be amended from time to time by the parties, and
YEAR means the period of 12 months commencing on the Commencement Date and
where applicable, each consecutive period of 12 months thereafter during
the term of this Agreement.
INTERPRETATION
1.2 In this Agreement, except as otherwise expressly provided or
unless the context otherwise requires,
(a) "this Agreement" means this Supply Agreement, including the Schedules
hereto, as from time to time supplemented or amended by one or more
agreements entered into pursuant to the applicable provisions hereof,
(b) the headings in this Agreement are inserted for convenience only and
do not form a part of this Agreement and are not intended to interpret,
define or limit the scope, extent or intent of this Agreement or any
provision hereof,
(c) the word "including", when following any general statement or term, is
not to be construed as limiting the general statement or term to the
specific items or matters set forth or to similar items or matters, but
rather as permitting the general statement or term to refer to all other
items or matters that could reasonably fall within its broadest possible
scope,
(d) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with Canadian generally accepted accounting
principles applied on a consistent basis,
(e) except where otherwise specified, all references to currency mean
currency of the United States of America,
(f) a reference to a statute includes all regulations made thereunder, all
amendments to the statute or regulations in force from time to time, and
any statute or regulation that supplements or
<PAGE> 6
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supersedes such statute or regulations,
(g) a reference to an entity includes any successor to that entity,
(h) words importing the masculine gender include the feminine or neuter,
words in the singular include the plural, words importing a corporate
entity include individuals, and vice versa,
(i) a reference to "approval", "authorization" or "consent" means written
approval, authorization or consent,
(j) a reference to a Part is to a Part of this Agreement and the symbol
Section followed by a number or some combination of numbers and letters
refers to the section, paragraph, subparagraph, clause or subclause of
this Agreement so designated.
SCHEDULES
1.3 The following are the schedules attached and incorporated in this Agreement
by reference and are deemed to form a part hereof:
Schedule A Materials Specifications
Schedule B First Year Products Forecast
Schedule C First Year Products Pricing
Schedule D Supplier Evaluation System Criteria
PART 2
SALE OF MATERIALS
MATERIALS SALE
2.1 [REDACTED]
SUPPLIER EVALUATION SYSTEM
2.2 [REDACTED]
<PAGE> 7
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MOST FAVOURED CUSTOMER
2.3 [REDACTED]
FIRST YEAR FORECAST AND PRICING
2.4 During the first year of this Agreement BPS agrees to buy at a minimum the
quantities set out in BPS's First Year Materials Forecast as set forth in
Schedule B and UCAR CARBON agrees to sell Materials at the prices set forth in
UCAR CARBON'S First Year Materials Pricing as set forth in Schedule C. UCAR
CARBON's pricing and delivery schedule for the first year is subject to change
if BPS makes a material change in its First Year Materials Forecast.
FUTURE FORECASTS AND PRICING
2.5 Future forecasts, pricing and production for the Materials will be dealt
with as follows:
(a) [REDACTED]
(b) [REDACTED]
(c) [REDACTED]
(d) [REDACTED]
(e) [REDACTED]
DELIVERY OF MATERIALS
2.6 Without derogating from its obligations to supply the Materials on a timely
basis, UCAR CARBON must achieve, in any eight-week period
(a) [REDACTED]
<PAGE> 8
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(b) [REDACTED]
(c) [REDACTED]
For the purposes hereof, in determining on-time delivery dates, Materials that
do not meet the agreed Specifications will be deemed not to have been delivered.
LICENSE TO USE OF MATERIALS
2.7 Subject to Section 2.9 of the Collaboration Agreement, UCAR CARBON hereby
grants to BPS a perpetual, irrevocable, worldwide, non-exclusive, royalty-free
and paid-up right and license under UCAR CARBON's Intellectual Property rights
to use the Materials supplied by UCAR CARBON to BPS in connection with the
development, manufacture, use or sale of electrically conductive fuel cell
separator plates.
IMPROVEMENTS TO MATERIALS
2.8 [REDACTED]
2.9 [REDACTED]
PART 3
CONDITIONS OF SALE
SALES/PURCHASE ORDER CONDITIONS
3.1 All sales of Materials and all purchase orders issued and acknowledged under
this Agreement will be subject to the Terms and Conditions set forth below:
(a) ACCEPTANCE
A purchase order is not binding on BPS until accepted by UCAR CARBON.
Acceptance of a purchase order and all terms and conditions as set out in
this Section 3.1 will take place when (i) BPS receives UCAR CARBON's
acknowledgement by electronic mail, fax or other agreed form, or (ii) UCAR
CARBON delivers to BPS the materials or items ordered, whichever is
earlier.
(b) PRICE
The price for the materials or items ordered will be paid by BPS in
cleared funds to the bank
<PAGE> 9
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nominated by UCAR CARBON within 30 days after the later of
(a) receipt by BPS of the ordered goods, and
(b) the date of the applicable invoice,
such payment to be made by check, credit transfer or irrevocable confirmed
letter of credit; provided that, subject to BPS's rights under Section
3.1(h) and in the purchase order, BPS will only be obligated to pay for
materials or items that are actually received by it. In addition, to the
purchase price, BPS will pay to UCAR CARBON the amount of all taxes,
excises or other governmental charges (except taxes on or measured by
income) that UCAR CARBON may be required to pay with respect to the
production, sale or transportation of any materials or items delivered to
BPS under the purchase order.
(c ) OVERSHIPMENTS, INSTALLMENTS
BPS will pay only for the maximum quantities ordered. Overshipments will
be held at UCAR CARBON's risk and expense for a reasonable time while
awaiting shipping instructions from UCAR CARBON. Return shipping charges
for excess quantities will be at UCAR CARBON's expense. Any provision
herein for delivery of materials or items by installment will not be
construed as rendering the obligations of UCAR CARBON severable and BPS
will only be obliged to pay the price of the materials or items included
in such installment after such installment is actually received by BPS.
(d) PACKING AND SHIPMENT
Unless otherwise specified in the purchase order, if the price of the
ordered materials or items is based on the weight thereof, such price must
reflect the net weight of the materials or items ordered only, and no
charges will be allowed for boxing, crating, handling damage, carting,
drayage, storage or other packing requirements. Unless otherwise specified
in the purchase order, all ordered materials or items must be securely
packed in cartons, boxes or other containers, and marked and otherwise
prepared for shipment in a manner which is
(i) in accordance with good commercial practice,
(ii) acceptable to common carriers for shipment at the lowest rate
for the particular materials or items, and
(iii) adequate to ensure safe arrival of the ordered materials or
items at the named destination.
UCAR CARBON must mark all containers with necessary lifting, handling and
shipping information, purchase order numbers, date of shipment and the
names of the consignee and
<PAGE> 10
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consignor, if applicable. An itemized packaging sheet must accompany each
shipment. No partial or complete delivery will be permitted hereunder
before the date or dates specified for delivery without BPS's prior
written consent thereto. If the ordered materials or items are improperly
delivered for shipment, any additional cost thereby incurred will be for
the account of, and will be paid by, UCAR CARBON, and may be deducted by
BPS from the payment of the price for such materials or items.
(e) DELIVERY
Unless otherwise directed by BPS or specifically provided in the purchase
order, the materials or items called for hereunder will be delivered on a
FCA origin basis. The term "FCA" has the meaning ascribed thereto in, and
is to be interpreted in accordance with, the Incoterms 1990 published by
the International Chamber of Commerce. Notwithstanding the shipping terms
contained in the purchase order, title to the materials or items and risk
will remain with UCAR CARBON and not pass to BPS until delivery to BPS's
named destination for importation.
(f) WARRANTIES
UCAR CARBON warrants, represents, covenants and agrees as follows:
(i) the materials or items supplied pursuant to the purchase
order will
(A) be in full compliance with BPS's Specifications,
blueprints, drawings and data,
(B) be in conformity with samples approved by BPS,
(C) not infringe any patent, copyright, trade secret, mask
work right, trademark or other intellectual property right of
any person covering the material or item itself but UCAR
CARBON does not warrant against infringement by reason of the
use of such material or item in combination with other
articles or material or in the practice of any process other
than a process for which such item has been expressly
manufactured by UCAR CARBON,
(D) be so supplied, and BPS will have title thereto, free and
clear of all liens, charges, encumbrances and security
interests;
(ii) THERE ARE NO EXPRESS WARRANTIES BY UCAR CARBON OTHER THAN THOSE
SPECIFIED IN THIS SECTION. NO WARRANTIES BY UCAR CARBON (OTHER THAN
WARRANTY OF TITLE AS PROVIDED BY THE UNIFORM COMMERCIAL CODE) SHALL
BE IMPLIED OR OTHERWISE CREATED AT LAW OR IN EQUITY, INCLUDING, BUT
NOT LIMITED TO, WARRANTY OF MERCHANTABILITY
<PAGE> 11
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AND WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. Without limiting
the generality of the foregoing, BPS assumes all risk and liability
for the results obtained by the use of any products delivered
hereunder in combination with other articles or material or in the
practice of any process other than a process for which such item has
been expressly manufactured by UCAR CARBON.
(iii) BPS's receipt of any products delivered hereunder shall be an
unqualified acceptance of, and a waiver by BPS of any and all claims
(including claims arising under the warranties specified in this
Section 3.1(f)) with respect to, such products unless BPS gives UCAR
CARBON notice of claim within 150 days after such receipt or within
ten days after BPS shall have received written notice of any claim
of infringement covered by clause (i) above,
(iv) if any materials or items delivered hereunder do not meet the
warranties specified herein, BPS may, at its option
(A) require the UCAR CARBON to correct, at no cost to BPS, any
defective or non-conforming materials or items by repair or
replacement, or
(B) return such defective or non-conforming materials or items
at UCAR CARBON's expense to the UCAR CARBON and recover from
the UCAR CARBON the purchase order price thereof, or
(C) correct the defective or non-conforming materials or items
itself and charge UCAR CARBON with the cost of such
correction.
The foregoing remedies are exclusive to BPS.
(v) No waiver by BPS of any drawing or specification requirement for
one or more of the materials or items ordered will constitute a
waiver of such requirements for the remaining materials or items to
be delivered hereunder, unless specified by BPS in writing. The
provisions of this Section 3.1(f) will not limit or affect the
rights of BPS under Section 3.1(h).
(g) INVOICES
Each invoice issued as a result of the purchase order must
(i) be rendered separately for each delivery,
(ii) not cover more than one purchase order,
(iii) contain the purchase order number under which it is issued,
and
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(iv) be rendered to the proper Accounts Payable Department of BPS as
set forth in the purchase order.
Invoice payment terms will be calculated from the date the invoice
is received by the proper Accounts Payable Department of BPS by electronic
mail, fax or other agreed form.
(h) INSPECTION
Materials or items purchased pursuant to the purchase order are subject to
BPS's inspection and approval at any place BPS may reasonably designate.
BPS may, without liability hereunder or otherwise and without prejudice to
any other rights or remedies available to it, reject and refuse acceptance
of any materials or items, which do not conform in all respects to
(i) any instructions contained in the purchase order,
(ii) BPS's Specifications, drawings, blueprints and data, or
(iii) UCAR CARBON's warranties.
With respect to any materials or items which do not so conform, BPS may,
in BPS's sole discretion, hold such materials or items for UCAR CARBON's
inspection at UCAR CARBON's risk upon notification to UCAR CARBON, or
return such materials or items to UCAR CARBON at UCAR CARBON's expense.
BPS's rejection of any materials or items subject to the purchase order
will be without prejudice to its rights to require UCAR CARBON to perform
its obligations in respect of the balance of the purchase order. Payment
for any item will not be deemed to be an acceptance thereof.
(i) CHANGES
BPS may, with reasonable notice to UCAR CARBON, at any time change
(i) the Specifications, drawings, blue prints and data concerning
the ordered materials or items where such materials or items are to
be specifically manufactured for BPS,
(ii) the method of packaging, packing or shipment of the ordered
materials or items, and
(iii) the place and/or time of delivery of such materials or items.
If any such change causes an increase or decrease in the cost(including
any unusable work in progress) or the time required for the delivery of
the materials or items ordered, UCAR CARBON will claim an equitable
adjustment in the price or delivery schedule, or both within 30 days after
<PAGE> 13
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receipt by UCAR CARBON of the requested change.
(j) INDEMNIFICATION
Each party will indemnify and hold the other harmless from and against any
claim, demand, cause of action, damage, costs and expenses which the other
might sustain or become liable for arising from or in connection with that
party's performance or nonperformance hereunder. No claims of any kind,
with the exception of those claims arising out of Section 3.1(f)(i)(C),
Section 3.1(f)(i)(D), Section 3.1(k)or Part 6 of the Agreement with
respect to any material or item covered by this document, whether as to
materials or items delivered or for delayed delivery or non-delivery of
the material or item and whether or not based on negligence or warranty,
shall be greater in aggregate amount than the purchase price of the
materials or items in respect of which such claims are made. In no event,
with the exception of those claims arising out of Section 3.1(f)(i)(C),
Section 3.1(f)(i)(D), Section 3.1(k) or Part 6 of the Agreement shall
either party be liable for special, indirect or consequential damages,
whether or not caused by or resulting from the negligence of such party.
(k) PATENTS
UCAR CARBON will defend, at UCAR CARBON's own expense, all suits, actions
or proceedings in which BPS, or any of the BPS's distributees or dealers,
or the users, lessees or customers of any of BPS's products, are made
defendants for actual or alleged infringement of any copyright, trademark,
trade secret, mask work right, Canadian, U.S. or other foreign patent or
other intellectual property right resulting from the possession, use, sale
or resale of any material or item purchased hereunder. If by virtue of a
patent infringement suit an injunction is issued against BPS which
prohibits or limits the use of any materials or items ordered or purchased
hereunder or UCAR CARBON notifies BPS to cease use of any materials or
items purchased hereunder, UCAR CARBON, at BPS's request, will supply BPS
with non-infringing replacement materials or items of a similar kind,
quality and quantity. BPS will cease use of materials or items purchased
hereunder which are subject to an infringement action upon receipt of
notice of such action and upon request by UCAR CARBON. UCAR CARBON's
obligations under this Section 3.1(k) or Section 3.1(j) do not apply to
any suits, actions or proceedings in which the actual or alleged
infringement results from the use of such material or item in combination
with other articles or material or in the practice of any process other
than a process for which such item has been expressly manufactured by UCAR
CARBON.
(l) COMPLIANCE WITH LAW
UCAR CARBON warrants and represents that it has complied with, and will
continue, during the performance of its obligations hereunder, to comply
with, all laws and conform to all requirements of each applicable
governmental authority with respect to the supply of the ordered materials
or items, including those concerning the packaging, storage, shipment and
exportation of all or any part thereof, and will ensure that no chemical
substance delivered to BPS is on the list of prohibited substances
described in applicable environmental laws. UCAR CARBON will obtain all
federal, provincial, state, municipal and other government or regulatory
licenses, permits or other
<PAGE> 14
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documents or permissions that are required by BPS that are incidental to
the sale or shipment of the ordered materials or items to BPS.
BPS warrants and represents that it has complied with, and will continue,
during the performance of its obligations hereunder, to comply with, all
laws and conform to all requirements of each applicable governmental
authority with respect to the ordered materials or items and payment
therefor and importation thereof.
(m) NON-PUBLICITY
Except as may be required by law or applicable governmental regulatory
authorities, neither party will, without the prior written consent of the
other party
(i) make any news release, public announcement, denial or
confirmation of any purchase order or its subject matter, or
(ii) in any manner advertise or publish the fact that BPS has placed
any purchase order with UCAR CARBON.
(n) PROPERTY
All tooling, equipment or material of every description owned by a party
to this Agreement(the "Owner") and furnished to the other party or
specifically paid for by the Owner, and any replacement thereof, will
remain the property of the Owner. Such property, and whenever practical,
each individual item thereof, will be plainly marked or otherwise properly
identified as the "Property of the Owner." and will be safely stored. The
party will not substitute any property for the Owner's property and will
not use such property except in fulfilling the purchase order. Such
property, while in the party's custody or control, will be held at that
party's expense, and will be insured by that party in an amount equal to
its replacement cost with loss payable to Owner. Such property will be
prepared for shipment and delivered in good condition, normal wear and
tear excepted, to the Owner on a FCA origin basis immediately upon request
by the Owner.
(o) TERMINATION
BPS may require UCAR CARBON to terminate work under any purchase order in
whole or in part at any time by notice to UCAR CARBON in writing,
whereupon UCAR CARBON will immediately stop work on the purchase order, or
the terminated portion thereof, and notify its subcontractors to do
likewise. Except for such termination as is caused by a default or delay
of UCAR CARBON, UCAR CARBON will be entitled to reimbursement for its
actual costs applicable to the termination incurred up to and including
the date of termination. UCAR CARBON will also be entitled to reasonable
profit on the work done before such termination at a rate not exceeding
the rate used in establishing the original purchase price. The total
amount of such claim will not exceed the cancelled commitment value of the
purchase order.
<PAGE> 15
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(p) TERMINATION FOR DEFAULT
The BPS and UCAR CARBON covenant and agree as follows:
(i) BPS may, by written notice, terminate any purchase order in
whole or in part if UCAR CARBON fails
(A) to make delivery of the ordered materials or items or to
perform the services in the manner and within the time
specified therefor or any extension thereof by written change
order or amendment, or
(B) to replace or correct defective materials or items in
accordance with Section 3.1(f) and Section 3.1(h), or
(C) to perform any other provision of the purchase order, or
(D) to make progress so as to endanger performance of its
obligations under the purchase order;
(ii) if a purchase order is terminated by reason of UCAR CARBON's
default, UCAR CARBON will transfer title and deliver to BPS,
promptly at BPS's request, in the manner and to the extent directed
by BPS,
(A) any completed materials or items, and
(B) such particularly completed materials or items as UCAR
CARBON has produced or acquired for the performance of the
terminated part of the purchase order.
UCAR CARBON will protect and preserve such property in the
possession of UCAR CARBON. Payment for completed materials or items
delivered to and accepted by BPS will be in an amount agreed upon by
UCAR CARBON and BPS, which amount must not exceed the contract price
therefor; and
(iii) failure by BPS to enforce any of its rights under the purchase
order will not be deemed a waiver thereof.
(q) ATTORNEY'S FEES
If UCAR CARBON and BPS are unable to resolve any dispute arising under the
purchase order and any suit or other judicial proceeding is instituted
with reference thereto, the successful party in any such suit or other
judicial proceeding will be paid promptly by the other party an additional
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amount equal to the successful party's reasonable attorney's fees and
costs incurred.
(r) GENERAL
The following general provisions will apply to all purchase orders:
(i) time will be of the essence hereof;
(ii) the purchase order is given pursuant to this Agreement and will
be subject to the terms of this Agreement and in the event of any
conflict between the terms of this Agreement and the terms of the
purchase order, the terms of this Agreement will govern;
(iii) waiver by a party of any of its rights or default by the other
hereunder will not be deemed a waiver by such party of any other
right or default;
(iv) UCAR CARBON will not change a purchase order or ship
non-conforming items without first obtaining the written consent of
BPS;
(v) UCAR CARBON will, from time to time upon request by BPS, do,
execute, acknowledge, deliver, or cause to be done, executed,
acknowledged and delivered, all and every such further acts, bills
of sale, bills of lading, deeds, transfers and assurances as BPS may
reasonably request to evidence or protect BPS's ownership interest
in the ordered items or to carry into effect the intentions of the
parties as set out in this purchase order.
(vi) UCAR CARBON will, at BPS's request, make available to BPS's
Affiliates those items or materials of the kind that are the subject
matter of the purchase order at prices payable by BPS under the
purchase order. UCAR CARBON may but is not required, at BPS's
request, to make available to BPS licensees and customers those
items or materials of the kind that are the subject matter of the
purchase order at prices payable by BPS under the purchase order.
(s) ASSIGNMENTS
Neither party may assign any rights or obligations under a purchase order
(including the right to receive monies due hereunder) without the prior
written consent of the other party, and any purported assignment without
such consent will be void. No assignment will relieve the assigning party
from its obligations under the purchase order.
(t) NOTICE OF LABOR DISPUTE
Whenever an actual or potential labor dispute is delaying or threatens to
delay the timely performance of a purchase order, the affected party will,
as soon as practicable, notify the other
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party of such dispute and furnish all relevant details. Receipt by the
other party of such notice will not constitute a waiver by that party of
the affected party's obligation to meet the delivery schedule; however,
such dispute may constitute an event of Force Majeure as governed by this
Agreement.
(u) DISPUTE RESOLUTION AND APPLICABLE LAW
The Dispute Resolution and Applicable Law provisions set out in Parts 7
and Section 9.8 of this Agreement shall apply to all purchase orders.
EFFECT OF PURCHASE ORDER TERMS AND CONDITIONS
3.2 The terms and conditions set forth in this Part 3 apply only as to
individual purchase orders issued and accepted in the sale of materials under
this Agreement. In no way should any term contained in Section 3.1 be construed
to give greater rights to a party or alter or amend the obligations of BPS or
UCAR CARBON under the other terms of this Agreement. While a breach of the
individual terms of a purchase order may give rise to a remedy under that
particular purchase order, as set out in this Part 3, in no event will such
breach of an individual purchase order be considered an Event of Default under
this Agreement.
REVISED PURCHASE ORDER TERMS AND CONDITIONS
3.3 BPS will notify UCAR CARBON as soon as reasonably practicable of any
proposed changes to, or substitutions of, the Terms and Conditions. No change to
the Terms and Conditions will be effective as to UCAR CARBON until the parties
have agreed to such change in writing as provided for in this Agreement.
PART 4
PRICE OF THE PRODUCTS
PRICE
4.1 Subject to Section 2.3, the price payable by BPS for the Materials will be
as follows:
<PAGE> 18
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(a) [REDACTED]
(b) for all other Material supplied by UCAR CARBON and purchased by BPS
the price will be as may be agreed upon by the parties pursuant to
Section 2.4 and Section 2.5.
PART 5
GRANT OF LICENSE
[REDACTED]
5.1 [REDACTED]
[REDACTED]
5.2 [REDACTED]
LICENSE RESTRICTIONS
5.3 [REDACTED]
TECHNOLOGY TRANSFER
<PAGE> 19
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5.4 [REDACTED]
FURTHER ASSURANCES FOR LICENSED MATERIALS
5.5 UCAR CARBON will execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of the provisions of this Part 5.
SURVIVAL OF PART 5 PROVISIONS
5.6 [REDACTED]
PART 6
CONFIDENTIALITY
CONFIDENTIALITY OBLIGATIONS
6.1 Each party (for purposes of this Part 6, the "Recipient"), at all times
during this Agreement and for a period of ten years after the expiry hereof,
(a) will, and will ensure that each of its directors, officers, employees,
Affiliates, licensees, including sublicensees (collectively, the
"Recipient's Agents") will, hold in confidence and keep confidential the
Confidential Information of a party (the "Disclosing Party") disclosed to
it by the Disclosing Party,
(b) will not, and will use reasonable efforts to ensure that the
Recipient's Agents will not, directly or indirectly, use or disclose any
such Confidential Information except to the extent that it is strictly
necessary under this Agreement or the Collaboration Agreement,
(c) will cause the Recipient's Agents that are recipients of or exposed to
such Confidential Information, to execute confidentiality agreements to
protect the same,
(d) will not, and will ensure that the Recipient's Agents will not, except
to the extent necessary for the purposes of this Agreement, make copies of
or otherwise reproduce such Confidential Information, and
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(e) will, and will ensure that each of the Recipient's Agents will, use
commercially reasonable best efforts to maintain all such Confidential
Information in a manner so as to protect the same against wrongful
disclosure, misuse, espionage and theft.
EXCEPTIONS FOR CONFIDENTIALITY
6.2 The Confidentiality obligations set out in Section 6.1 shall not apply to
any Confidential Information:
(a) which is or becomes generally available to the public through no
breach of this Agreement or any other obligation of the Recipient or the
Recipient's Agents to the Disclosing Party,
(b) of which the Recipient or the Recipient's Agents had knowledge before
the date of this Agreement, as evidenced by competent proof, unless the
same was disclosed to the Recipient or the Recipient's Agents by the
Disclosing Party,
(c) of which the Recipient or the Recipient's Agents obtained knowledge
from a third party, as evidenced by competent proof, unless such third
party obtained such Confidential Information in violation of any duty of
confidence owed to the Disclosing Party, or
(d) which is required to be disclosed pursuant to law or a rule,
regulation, policy or order of a governmental authority having
jurisdiction or pursuant to a final order or judgment of a court of
competent jurisdiction and in such case the parties will cooperate with
one another to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be afforded to such
Confidential Information.
EMPLOYMENT RELATIONS
6.3 Neither party will, during the term of this Agreement and for a period of
two years next after the expiry or termination hereof, solicit for employment
any individual who is, at the time of such solicitation, employed by the other
party or its Affiliates nor will such party, directly or indirectly, induce any
such individual to leave his or her employment. Nothing herein will prevent a
party from employing any such employee so long as no solicitation or inducement
has been made to such employee by or on behalf of such party.
REASONABLE RESTRICTION
6.4 Each party agrees that the restrictions contained in this Part 6 are
reasonable for the protection of the respective legitimate business interests of
the parties.
MUTUAL SECRECY AGREEMENT AND COLLABORATION AGREEMENT
6.5 The provisions of
<PAGE> 21
-21-
(a) the Mutual Secrecy Agreement (and not Section 6.1 and Section 6.2
hereof) will apply to all "Proprietary Information" (as defined in such
agreement) disclosed by the parties to one another before the Effective
Date (as defined in the Collaboration Agreement) notwithstanding that the
same Proprietary Information is disclosed again as Confidential
Information under this Agreement, and
(b) the provisions of the Collaboration Agreement (and not Section 6.1 and
Section 6.2) will apply to all Confidential Information disclosed by the
parties to one another during the term of the Collaboration
notwithstanding that the same Confidential Information is disclosed again
during the term of this Agreement.
SURVIVAL OF PART 6 PROVISIONS
6.6 Notwithstanding anything in this Agreement, the provisions of this Part 6
will be separate and distinct covenants and agreements enforceable after the
termination of this Agreement in accordance with the terms of this Part 6, and
any reference in this Agreement to termination will not affect this Part 6
unless specifically agreed to by the parties.
PART 7
DISPUTE RESOLUTION
INITIATION OF PROCESS
7.1 If at any time a dispute between the parties with respect to any matter
relating to this Agreement arises, a party that wishes that the issue be
considered further must give written notice (the "Dispute Notice") to the other
requiring that such issue or dispute be decided pursuant to this Part 7.
REFERRAL TO CHIEF EXECUTIVE OFFICERS
7.2 If a Dispute Notice is given, the Chief Executive Officers of each of the
parties will initiate discussions with a view to settling the issue or matter. A
decision reached by such Chief Executive Officers and communicated by them in
writing to the parties will be binding on the parties and will be implemented.
SUBMISSION TO ARBITRATION
7.3 If no decision is communicated by the Chief Executive Officers within 30
days after such issue or dispute is referred to them, either party may at any
time before a decision thereon is so communicated and less than 120 days after
delivery of the Dispute Notice, by further notice given to the other, submit the
issue or dispute for a binding determination by a three member arbitration panel
in
<PAGE> 22
-22-
accordance with the rules of arbitration of the International Chamber of
Commerce.
ACCEPTANCE AND IMPLEMENTATION
7.4 Each of the parties will accept and proceed in good faith diligently to
implement the binding award or decision of an arbitrator on an arbitration
pursuant to Section 7.3.
PLACE OF ARBITRATION
7.5 All arbitration proceedings will be conducted in San Francisco, California
or in such other place as the parties may agree.
LEGAL PROCEEDINGS
7.6 A legal proceeding commenced by a party to this Agreement in respect of an
issue or dispute that may be arbitrated under this Agreement will be stayed
until the time during which arbitration may be initiated has expired or, if
arbitration is initiated, a decision on the arbitration is delivered or the
arbitration process has otherwise ended.
EXCLUSIONS
7.7 This Part 7 will not apply to any action under Part 6 or for the grant of
provisional remedies, including injunctions, restraining orders and specific
performance, and each party reserves its right to commence such action or seek
such remedies from a court of competent jurisdiction.
PART 8
TERM AND TERMINATION
TERM
8.1 [REDACTED] If during such review period the parties cannot agree as to the
necessity or content of any such changes, the disagreement as to the proposed
changes shall be submitted to the Dispute Resolution Process set out in Part 7
and the Agreement will continue in effect as if no review had been initiated.
TERMINATION FOR DEFAULT
<PAGE> 23
-23-
8.2 [REDACTED]
NO PREJUDICE
8.3 The right to terminate this Agreement will not prejudice any other right or
remedy of either party in respect of the breach concerned (if any) or any other
breach.
NO FURTHER OBLIGATIONS
8.4 Subject to Section 5.6 and Section 6.6 and the Collaboration Agreement, upon
the termination of this Agreement for any reason, except for any rights or
obligations which may have accrued before termination, or rights specifically
contemplated to continue after termination or arise as a result of termination,
neither party will have any further rights or obligations to the other under
this Agreement.
PART 9
MISCELLANEOUS
MODIFICATIONS, APPROVALS AND CONSENTS
9.1 No amendment, modification, supplement, termination or waiver of any
provision of this Agreement will be effective unless in writing signed by both
parties and then only in the specific instance and for the specific purpose
given.
FURTHER ASSURANCES
9.2 The parties will execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Agreement.
ENTIRE AGREEMENT
9.3 This Agreement and the Collaboration Agreement constitute the entire
agreement between the parties hereto and supersede all previous expectations,
understandings, communications, representations and agreements whether verbal or
written between the parties.
NOTICES
<PAGE> 24
-24-
9.4 Every notice, request, demand, direction or other communication (each, for
the purposes of Section 9.4, Section 9.5 and Section 9.6, a "Notice") required
or permitted to be given pursuant to this Agreement will be deemed to be well
and sufficiently given if in writing and delivered by hand (or recognized
overnight courier service addressed as follows:
(a) if to BPS at:
9000 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J9
Attention: President and Chief Operating Officer
Facsimile: (604) 412-3131
with a copy to BPS's Vice-President, Corporate Affairs at the
same address; and
(b) if to UCAR CARBON at:
3102 West End Avenue
Suite 1100
Nashville, Tennessee
USA 37203
Attention: The President
Facsimile: (615) 760-7797
with a copy to UCAR CARBON's General Counsel at the same address;
or to such other address as is specified by the particular party by Notice to
the others.
DEEMED RECEIPT
9.5 Any Notice delivered as aforesaid will be deemed conclusively to have been
effectively given and received on the day Notice was delivered if it was on a
day that was a Business Day or on the next day that is a Business Day if it was
delivered on a day that was not a Business Day.
CHANGE OF ADDRESS
9.6 A party may at any time, by Notice to the others, change its
address.
ENUREMENT
9.7 This Agreement will enure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns.
<PAGE> 25
-25-
APPLICABLE LAW
9.8 This Agreement will be deemed to have been made in British Columbia, Canada
and the construction, validity and performance of this Agreement will be
governed in all respects by the laws of British Columbia and applicable laws of
Canada. The application of the provisions of the United Nations Convention on
Contracts for the International Sale of Goods are hereby excluded.
ATTORNMENT
9.9 Each party irrevocably attorns to the exclusive jurisdiction of the courts
of British Columbia, Canada and all courts having appellate jurisdiction
thereover in respect of any proceeding arising out of or relating to this
Agreement.
JUDGMENT CURRENCY
9.10 If, for the purposes of obtaining a judgment in any court, it is necessary
to convert a sum awarded in Canadian Dollars (the "Original Currency") into
United States Dollars (the "Judgment Currency"), the parties agree that the rate
of exchange used shall be established on the business day preceding the date on
which the final judgment is rendered by the court. If it is necessary to convert
a sum awarded in United States Dollars (the "Original Currency") into Canadian
Dollars (the "Judgment Currency"), the parties agree that the rate of exchange
used shall be established on the business day preceding the date on which the
final judgment is rendered by the court. The rate of exchange shall be
determined by reference to the Bank of Canada noon rate of exchange for Canadian
to U.S. Dollars or U.S. to Canadian as published by Reuters. In the event such
rate is not available through Reuters the rate shall be ascertained by reference
to any other means by which such rate is published from time to time by the Bank
of Canada.
FORCE MAJEURE
9.11 Neither party will be liable to the other for default or delay in the
performance of its obligations under this Agreement if such default or delay is
caused by fire, strike, riot, war, act of God, delay of carriers, governmental
orders or regulation, complete or partial shutdown of plant by reason of
inability to obtain sufficient raw material or power, or any other occurrence
beyond the reasonable control of such party. The party whose performance is
prevented by any such occurrence will notify the other party of the same in
writing as soon as is reasonably possible after the commencement thereof, will
provide the other with full written particulars of such occurrence and attempts
made to remedy the same, will use commercially reasonable efforts to remedy such
occurrence with all reasonable dispatch and, upon cessation of the occurrence,
will give prompt written notice to the other party of the same. Should an event
of Force Majeure continue for such a period of time that UCAR CARBON will not be
able to meet BPS's monthly forecast as originally established in the Annual
Commitment for the Materials, UCAR CARBON
<PAGE> 26
-26-
shall use reasonable commercial efforts to obtain an alternative source for
performance which may include leasing production time, assigning a temporary
license to allow a third party (which may include BPS) to fulfill the immediate
production concerns and/or other appropriate actions.
SEVERABILITY
9.12 If any provision contained in this Agreement is found by any court or
arbitrator for any reason to be invalid, illegal or unenforceable in any
respect,
(a) the validity, legality and enforceability of the remaining provisions
contained herein will not in any way be affected or impaired thereby,
unless in either case as a result of such determination this Agreement
would fail in its essential purpose, and
(b) the parties will use their best efforts to substitute for any
provision that is invalid, illegal or unenforceable a valid and
enforceable provision which achieves to the greatest extent possible the
economic, legal and commercial objectives of such invalid, illegal or
unenforceable provision and of this Agreement and, failing the agreement
of the parties on such a substitution within 30 days after the finding of
the court or arbitrator, either party may refer the matter for dispute
resolution under Part 7.
COUNTERPARTS
9.13 This Agreement may be executed in counterparts or by facsimile, each of
which will together, for all purposes, constitute one and the same instrument,
binding on the parties, and each of which will together be deemed to be an
original, notwithstanding that both parties are not signatories to the same
counterpart or facsimile.
ASSIGNMENT
9.14 Neither party may assign any right, benefit or interest in this Agreement
without the written consent of the other party, such consent not to be
unreasonably withheld, and any purported assignment without such consent will be
void. Notwithstanding the foregoing, upon notice to the other party, either
party may assign this Agreement to a wholly owned subsidiary of that party
without the other party's consent provided that no such assignment will release
the assignor from its obligations under this Agreement.
NO PARTNERSHIP
9.15 Nothing in this Agreement will create, or be deemed to create, a
partnership between the parties.
<PAGE> 27
-27-
Dated as of the day and year first above written.
UCAR CARBON COMPANY INC. BALLARD POWER SYSTEMS INC.
By: /s/ G.E. Playford, CEO By: /s/ Michael Graydon
------------------------------ -------------------------------
Authorized Signatory Authorized Signatory
By: /s/ Karen G. Narwold, Asst. Sec. By: /s/
------------------------------ -------------------------------
Authorized Signatory Authorized Signatory
<PAGE> 28
SCHEDULE A
MATERIALS SPECIFICATIONS
[REDACTED]
<PAGE> 29
SCHEDULE B
FIRST YEAR PRODUCT FORECAST
[REDACTED]
<PAGE> 30
SCHEDULE C
FIRST YEAR PRODUCTS PRICING
[REDACTED]
<PAGE> 31
SCHEDULE D
SUPPLIER EVALUATION SYSTEM CRITERIA
[REDACTED]
<PAGE> 32
SUPPLY AGREEMENT
MADE AS OF AUGUST 5, 1999
BETWEEN
UCAR CARBON COMPANY INC.
AND
BALLARD POWER SYSTEMS INC.
<PAGE> 33
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART 1...................................................................... 2
DEFINITIONS............................................................... 2
INTERPRETATION............................................................ 5
SCHEDULES................................................................. 5
PART 2...................................................................... 6
MATERIALS SALE............................................................ 6
SUPPLIER EVALUATION SYSTEM................................................ 6
MOST FAVOURED CUSTOMER.................................................... 6
FIRST YEAR FORECAST AND PRICING........................................... 6
FUTURE FORECASTS AND PRICING.............................................. 6
DELIVERY OF MATERIALS..................................................... 7
LICENSE TO USE OF MATERIALS............................................... 7
IMPROVEMENTS TO MATERIALS................................................. 7
PART 3...................................................................... 8
SALES/PURCHASE ORDER CONDITIONS........................................... 8
EFFECT OF PURCHASE ORDER TERMS AND CONDITIONS............................. 15
REVISED PURCHASE ORDER TERMS AND CONDITIONS............................... 16
PART 4...................................................................... 16
PRICE..................................................................... 16
PART 5...................................................................... 16
[REDACTED] ................................................... 16
[REDACTED] ................................................... 16
LICENSE RESTRICTIONS...................................................... 16
TECHNOLOGY TRANSFER....................................................... 17
FURTHER ASSURANCES FOR LICENSED MATERIALS................................. 17
SURVIVAL OF PART 5 PROVISIONS............................................. 17
PART 6...................................................................... 17
CONFIDENTIALITY OBLIGATIONS............................................... 17
EXCEPTIONS FOR CONFIDENTIALITY............................................ 18
EMPLOYMENT RELATIONS...................................................... 18
REASONABLE RESTRICTION.................................................... 18
MUTUAL SECRECY AGREEMENT AND COLLABORATION AGREEMENT...................... 19
SURVIVAL OF PART 6 PROVISIONS............................................. 19
PART 7...................................................................... 19
INITIATION OF PROCESS..................................................... 19
REFERRAL TO CHIEF EXECUTIVE OFFICERS...................................... 19
SUBMISSION TO ARBITRATION................................................. 19
ACCEPTANCE AND IMPLEMENTATION............................................. 20
PLACE OF ARBITRATION...................................................... 20
LEGAL PROCEEDINGS......................................................... 20
EXCLUSIONS................................................................ 20
PART 8...................................................................... 20
TERM...................................................................... 20
</TABLE>
<PAGE> 34
<TABLE>
<S> <C>
TERMINATION FOR DEFAULT................................................... 20
NO PREJUDICE.............................................................. 21
NO FURTHER OBLIGATIONS.................................................... 21
PART 9...................................................................... 21
MODIFICATIONS, APPROVALS AND CONSENTS..................................... 21
FURTHER ASSURANCES........................................................ 21
ENTIRE AGREEMENT.......................................................... 21
NOTICES................................................................... 21
DEEMED RECEIPT............................................................ 22
CHANGE OF ADDRESS......................................................... 22
ENUREMENT................................................................. 22
APPLICABLE LAW............................................................ 22
ATTORNMENT................................................................ 22
JUDGMENT CURRENCY......................................................... 23
FORCE MAJEURE............................................................. 23
SEVERABILITY.............................................................. 23
COUNTERPARTS.............................................................. 24
ASSIGNMENT................................................................ 24
NO PARTNERSHIP............................................................ 24
</TABLE>
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report dated March 24, 2000, except as to
note 11, which is as of April 14, 2000, included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Cleveland, Ohio
April 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 5,021
<ALLOWANCES> 130
<INVENTORY> 2,732
<CURRENT-ASSETS> 8,202
<PP&E> 25,608
<DEPRECIATION> 9,639
<TOTAL-ASSETS> 24,171
<CURRENT-LIABILITIES> 5,655
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,668
<TOTAL-LIABILITY-AND-EQUITY> 24,171
<SALES> 33,782
<TOTAL-REVENUES> 33,782
<CGS> 21,437
<TOTAL-COSTS> 6,246
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 130
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,099
<INCOME-TAX> 2,516
<INCOME-CONTINUING> 3,583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,583
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
